Carbon trading: Colonising the atmospheric commons
2009-11-05, Issue 456
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Whether it is used to described rolling blackouts or civil wars, the catchphrase ‘Africa wins again’ remains a favourite amongst naysayers naturalising the continent as a place where tragedies symbolise the realisation of Africa’s innate ‘destiny’ – to self-destruct.
ARMS AND ENERGY
Of course, such ‘tragedy’ is rarely located in context: The US for example has supplied arms or technology to 90 per cent of conflicts at the turn of the millennium. Presently, there is a 92 per cent correlation between rising arms sales and rising oil prices and over 50 per cent of government-to-government buyers are autocratic governments with brutal human rights records.
But militarisation directly corresponds with the policies underpinning the exploitation of resources ‘held in common’, specifically fossil fuels. Despite obvious scientific evidence that the global commons can no longer sustain carbon dumps, the battle to geostrategically secure fossil fuel resources has intensified, especially in Africa.
This is not because the US and China, for example, lack the know-how to utilise renewable energy. In fact, implementing (‘05) current technology renders it possible to reduce emissions to pre 2000 levels while making a profit on at least 50 per cent of implemented technologies – and this achievable by 2010 with ‘zero net costs’.
Says who? The UN’s Intergovernmental Panel on Climate Change (IPCC) – almost five years ago.
Yet developed nations, specifically the US, emitting 19 tonnes of carbon dioxide emissions per capita annually, continue subsidising oil giants to the tune of US$300 billion, all the while claiming that significant caps cannot be realised.
Meanwhile, for mal-developed regions situated at the base of the commodity chain, blackouts – the result of structural adjustment programmes upending basic state services, are guaranteed by ecologically destructive ‘white elephant’ projects such as mega-dams, classified as low-carbon sources of energy.
CLEAN AND GREEN?
Over 60 per cent of Africa’s energy is derived from hydropower, chiefly linking mega-dams to foreign industries via costly transmission lines. In the process, disruption and loss of riverine resources and flood recession agriculture – amongst other socio-ecological consequences – are marginalised as externalities.
Thanks to ‘offsets’ that grant industrial polluters a ‘get-out-of-jail-free card through the Clean Development Mechanism (CDM), polluters circumvent caps by bankrolling ‘green-wrapped’ business-as-usual projects in poor countries.
Yet ‘between a third and two-thirds’ of CDM projects do not represent actual reductions, according to the head of Stanford University’s Sustainable Development programme. (Like many other institutions of influence, Stanford was on the receiving end of US$225 million in oil-money from Exxon-Mobil for its Global Climate and Energy project.) Instead, offsets facilitate the process of corporate gaming, simultaneously utilising Africa’s ‘underdeveloped’ status as yet another exploitable resource.
A CANCEROUS LEGACY
It’s happening in my old home town of Clare Estate in Durban, South Africa, where the Bisasar Road dump – previously Africa’s largest landfill, will remain open for business, estimated to generate 6 MW of so-called ‘green power’ electricity from toxic gasses. (Durban’s daily consumption is around 1500 MW). Some fifteen years after liberation from apartheid, and countless promises to close and rehabilitate the dump, medical, industrial and domestic waste continues to frequent the land, formerly designated an Indian area by the apartheid regime’s Group Areas Act. But closing the dump – as opposed to harvesting methane – does not represent ‘market efficient’ economic use of pollutions trading i.e.: it does not generate cash.
Another alternative – integrating the landfill flow of gas (7 000m3 per hour) to Petronet’s pipelines running past the site – was rejected by Durban’s solid waste department (DSW) project manager who stated: ‘[What] if something goes wrong with this pipeline? If the land subsides or they do something funny with their pipeline…?’
The scar across my own pelvis perhaps bears witness to the carcinogenic effects of the dump. In one area of Clare Estate immediately adjacent to the dump, seven out of ten households ‘reported tumour cases,’ according to the late Sajida Khan, Bisasar’s whistleblower who in 2007 died of cancer fighting the dump’s cancerous legacy. She diagnosed her disease as stemming from the lack of Durban officials’ political will to close the dump: 'Poor countries are so poor they will accept crumbs. The World Bank know this and they are taking advantage of it.’
But if countries or nation-states are composed of citizens and regimes – two separate identities altogether – and the World Bank represents not the world but the disproportionate voting shares controlled by powerful economies, it follows that CDMs are justified and accepted not by the ‘poor’ but by those rich in political or financial capital.
According to the deputy head of the engineering at DSW, ‘What makes them worthwhile is the revenue that can be earned from carbon credits.’ Though private purchasers are rumoured to be financing the project, in 2008 at least, the World Bank’s Prototype Carbon Fund (PCF) was still billed as the chief bankroller at US$3.9 per ton, notwithstanding a 2005 withdrawal from Bisasar once it became a notorious case of a toxic CDM.
Despite cheap available solar and wind options, less than 5 per cent of the Bank’s CDM projects (2005) account for renewables, focusing instead on hydropower, methane-capture and other investments. This is not surprising given that the World Bank remains a consistent backer of fossil fuel projects with 82 per cent of the World Bank’s financing for oil-related projects designed for export back to the North. Since Kyoto in 1997, the Bank has invested billions in more than 128 fossil fuel projects, US$17 billion in related projects, with an increase of 256 per cent for coal from 2007-2008.
Bisasar’s CDM classification neatly legitimises the presence and active state of the lethal and carcinogenic dump for US$15 million in certified emissions reduction credits (CERs) for methane-to-electricity conversion over a 20-year lifespan.
Trevor Manuel, previously the country’s minister of finance, now head of planning, recently stated that CDM projects would even get tax exemptions. No need to convince the African regimes – already great fans of tax ‘competition’: Africa’s exports (80 per cent of which are primary commodities) are negotiated via secretive development agreements, swopping corporate tax holidays (the main source of income from rents) for bribes – a leitmotif that also appears to characterise the business of CDM.
THE AFRICA THAT WINS AGAIN…
Ironically, ‘Africa wins again’ traditionally referred not to the corporate-state corruption siphoning US$148 billion in development revenue each year from the continent, but to Africa’s harsh climates.
Yet, it is precisely this lack of revenue disclosure, redistribution and re-pricing –concealing social ecological costs of extractive industries classified as externalities or hidden costs – that has catapulted Africa into the position of continent most vulnerable to climate change, according to the UN’s IPCC. Unlike developed nations, which derive 80 per cent of wealth from intangible capital (education etc), African citizens depend on the health and evolution of direct ecosystem services such as fisheries, fertile land and fresh water, which account for 70-80 per cent of wealth. Unfortunately, according to the IPCC, by 2100, crop revenue will decrease by 90 per cent, particularly affecting small farmers lacking access to irrigation.
But the West’s liberalised version of the constitution, individualising human rights, dismantles democracy by undermining collective ecological and host community rights over shared resources. Not only do these communities lack legal titles to inhabited land, but regimes are often able to legally displace citizens on the discovery of valuable resources – in the name of the greater common good. It is the same logic used to justify land-grabbing – some three million fertile hectares (and the ground water beneath it) have been purchased by multinationals hiding behind the veneer of governments. ‘We are not farmers. We are a large company… The same way you have shoemakers and computer manufacturers, we produce agricultural commodities,’ stated an official from Agricola.
This is the opposite of the Africa’s rights-based concept of Ubuntu – a person is a person through ‘humanity’. But humanity cannot sustain itself without the shared resources that must be legally recognised before sustainable development (via sustainable economics) can be accomplished.
Rentier economies – dependent on corporations for wealth from primary commodities such as oil, perceive citizens as threats to usurped power. In contrast to high-income countries, citizens are not required to finance state budget and therefore possess no access to direct taxation, lending to political representation. The result: a resource-rich mal-developed continent controlled through forced peace i.e.: electoral authoritarianism, or militarisation. Though Africa remains a major supplier of fossil fuels, over 30 per cent of the total human population living in darkness resides in Africa, with the continent contributing just 5 per cent to global electrification and 3.5 per cent of carbon emissions.
Paradoxically, Africa supplies as yet unrecognised regulatory ecological services to the north such as the Central African rainforest – one third of the world’s intact tropical forests cumulatively absorbing 5 billion tonnes of carbon each year, conservatively valued at £13 billion – a figure almost equivalent to the ecological reparations offered by developed nations for exhausting the atmospheric commons. An estimated US$100 billion in regulatory carbon sinks is annually supplied by ‘developing countries’.
WHO OWNS THE AIR?
But global warming, packaged as an apolitical ‘environmental’ issue has yet to be placed in the context of selective justice, one that is determined by political capital, trivialising the ecological debt from rich nations to poor nations. Plausible estimates of just ecosystem services, such as the study recently conducted by the University of Berkeley, interrogating six categories including climate change, evidences the figure ranging from US$8.7 -$47 trillion dollars, while previous studies assessing 17 ecosystem services plausibly places the figure at US$33 trillion, revealing disproportionate burdens on maldeveloped regions. Yet the architects of the cap-and-trade system deliberately blur the lines between victim and aggressor, the former suffering mass the threat of ‘caps’ on survival carbon necessary for basic electrification, and the latter, seeking to propertise ownership of atmospheric rights. Given that 99 per cent of materials flowing to the US are trashed within six months, the logic of capping basic services in poor countries is baseless.
But the US’s goal – extending empire from the control of strategic resources to the ability of ‘rivals’ to access negative commons for development purposes is the primary reason the US failed to ratify the limpid and lopsided Kyoto Protocol.
THE PRICE OF POLLUTION
‘The carbon market doesn’t care about sustainable development,’ revealed Jack Cogen, president of Natsource, recently named the world’s largest buyer of private carbon credits, managing over US$1 billion in monetised ‘natural’ assets. ‘All it cares about,’ he continued, ‘is the carbon price.’
But the market itself, created out of thin (albeit toxic) air is not backed by industrial polluters for the purpose of profits from tradeable commodities – though this is certainly the intention of systemically important financial entities that designed the system like Goldman Sachs, exploiting deregulated vacuums in the global architecture.
Rather, pollution trading – muscled into the Kyoto Protocol by the then US Vice President Al Gore – using the sulphur dioxide model of the modified Clean Air Act (1990), facilitates the colonisation of the atmospheric ‘commons’ by privatising access. This is accomplished by granting major polluters – multinationals exploiting fossil fuels – durable and enforceable property rights to the atmosphere under the guise of incentivising the reduction of carbon, which accounts for 75 per cent of greenhouse gas emissions.
The logic of the cap-and-trade system, managing negative commons or dumps, requires multinationals to purchase credits or allowances, should companies exceed government-allocated caps. These credits, financed by taxpayers in developed countries, are often provided free of charge to polluters. The US’s permits, estimated at US$646 billion for a potential market of US$3 trillion (2020), will see US$55 billion or 69 per cent freely peddled to industry by 2012, with multinationals receiving 15 per cent in free permits to ‘cover their increased costs from the global warming protection program.’ In contrast, China – a world leader in solar and wind energy technology, proposes to convert 15 per cent of energy sources to renewable by 2020. Over 80 per cent of China’s energy is derived from coal.
Yet despite permits constituting ‘deferred taxes’, it is not government that quantifies the level of emissions, but multinationals themselves, facilitating a process where corporations inflate emissions. This paves the road for two possibilities: Allowing multinationals to control the price of pollution, artificially depreciating it via mass sell-offs, or alternately, creating artificial scarcity in order to profit from stashed permits. Since permits have been propertised, cancellation or withdrawal requires governments to finance corporate losses once again, using taxpayers’ funds. This of course brings back unpleasant memories of the US’s taxpayer funded ‘bank bail-out’. Though Goldman Sachs is posting profits, the millions who lost their homes were not so lucky.
According to David Victor of the US’s Council of Foreign Relations (CFR), emissions permits are ‘assets that, like other property rights, owners will fight to protect’. Crucially, it also legitimises the rights of polluters to monopolise the negative commons by exhausting already decreasing atmospheric capacity (projected at 500 billion tonnes in the next four decades at present rates), preventing former colonies and emerging nations from using their share of carbon sinks. And as most governments, save for the Netherlands, withdraw free meal tickets from multinationals that cease polluting, permits actually incentivise the use of fossil fuels, undermining innovation in renewable technologies.
In his position as chairman of the International Emissions Trading Association (IETA), representing over 170 corporate bodies, Cogen’s logic of markets not sustainability, resonated perfectly with gaseous corporate entities, interlocked at the diplomatic and board level with revolving door officials.
CARBON AND CORPORATIONS
It is a logic perfectly integrated with corporatised climate discourse. Conveniently, for example, there was little mention of the real roots of global warming in Al Gore’s Oscar-winning An Inconvenient Truth, which appeared to shift the blame to rural peoples burning logs instead of corporations, from slaughterhouses to oil giants, burning the atmosphere.
Pick away at any loose thread: Example, Kathleen McGinty, Natsource’s vice president of asset management was the former aide to Senator Al Gore, before rising to the position of key environmental advisor during Bill Clinton’s presidency. Goldman Sachs holds a ten per cent share in Al Gore’s Chicago Climate Exchange (CCX) – the US’s pilot carbon trading programme – while Goldman Sachs employees like Ken Newcombe, former head of the World Bank’s Climate Change Capital (‘a leading investment banking group’), are as voluminous on the scene as cranes in Dubai.
Goldman Sachs, Obama’s leading financial bundler (from a pool of systemically important Wall Street legal, securities, investment, banking and other financial entities including Citigroup and UBS) picked up the baton from Enron, whose former traders include Louis Redshaw, presently head of markets at Barclays Capital, creators of the world’s first Global Carbon Index.
Initially, the US’s sulphur programme, the progenitor of Kyoto’s cap-and-trade scheme, was shaped by Enron, once an obscure natural-gas pipeline corporation based in Texas, USA.
The scheme enabled the corporation to dominate the newly created US$20 billion commodities market facilitated by the revamped Clean Air Act’s sulphur trading programme, authorising emission trading. This resulted in artificial energy shortages such as occurred in California soon after the Act was muscled through. In fact, since the late 1970s, the Environmental Protection Agency (EPA), mandated with the right to regulate emissions, initiated an offset scheme for power plants allowing multi-state corporations to engage in modifications aimed at enhancing ‘efficiency’ of existing plants. The lack of ‘trade’ at that stage was due to the dearth of technology able to quantify emissions.
Enron’s success in deregulating the trade in electricity came courtesy of intensive lobbying in Washington, revolving door personnel like Wendy Gramm, as well as the financial wizardry of economic mercenaries stationed at Arthur Anderson, previously one of the world’s major accounting firms. Five weeks prior to joining Enron’s board of directors, Gramm – chairwoman of the Commodity Futures Trading Commission since the days of Texan trooper George H.W Bush’s vice presidency – forced through key regulatory exemptions shielding Enron’s books from public interrogation and government oversight. As early as 1989, Gramm issued policy memos lobbing for deregulation. Later, legislation pushed through Congress – bypassing the Senate Committee – was delivered by Gramm's husband Texan Senator Phil Gramm, a UBS exec during Obama’s election campaign. Hubby Phil would write the 11 000-page Commodity Futures Modernisation Act forbidding government from regulating derivatives and other toxic financial instruments, such as trading of energy commodities.
According to emails made public following investigations, the gap (pg 262 et al) in the Act dumped on Congress a few days before Christmas – and Clinton’s exit, known as the Enron ‘loophole’ was backed by important agents of deregulation such as Larry Summers and Alan Greenspan (present in the new Obama administration). Excerpts from the email reveal: ‘Gramm needs to fully understand how helpful the bill is to Enron…The legislation eliminates concerns that our derivatives transactions may be illegal or that our online platforms may be unregulated futures exchanges…Without this legislation the industry will be crippled…Senator Gramm has been contacted by a number of people urging passage of the bill. This clearly has had an impact. Senator Gramm appears committed, and he and his Staff are very focused…As the Bush transition moves forward, we need to monitor (or perhaps try to influence) the selection of the new CFTC Chair/Commissioners…’ (Emails can be seen at enronexplorer.com)
Arthur Andersen’s fall from grace – and that of Enron – does signify deviant acts on the part of corporate mercenaries, for such activities remain endemic to the global financial architecture.
The International Accounting Standard Board (IASB), for example, founded and financed by the ‘big four’ deliberately prevents corporate country-by-country reporting, indicating economic activities in host and home countries from being implemented, enabling corporations conducting 60 per cent of global trade within rather than between entities, to self-regulate global trade. Unsurprisingly, the big four – in addition to 430 major banks, 70 000 corporations, 720 insurance firms, amongst other trusts, funds, foundations and corporate vehicles, are registered in the world’s largest secrecy jurisdiction – the Cayman Islands.
The UN’s acceptance of cap-and-trade is not surprising as CCX includes many former UN officials such as Kofi Annan, in addition to former World Bank president James Wolfensohn amongst others. As far back as the UN’s Rio summit in 1992, Gore’s CCX, self-described as ‘the world’s first and North America’s only legally binding integrated emissions reduction, registry and trading system’, declared the need to realise ‘market-based solution to global warming.’
This ideology bears resemblance to ‘growth’ of the common cuckoo, brooding parasites that deposit eggs in the nests of other birds, carbon capitalism destroys and marginalises other living beings, voraciously feeding off host entities at the expense of host communities. If scientists are correct, and the atmosphere can withstand only 250 billion tonnes more in our carbon budget before we hit bankruptcy, our choices, until the earth recovers, are limited to a zero-carbon future – beginning with drastic cuts in developed not developing countries. This means doing away with carbon capitalism and capitalism overall. The only other alternative is a zero-future.
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* Khadija Sharife is a journalist and a visiting scholar at the Centre for Civil Society (CCS) based in South Africa.
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