Carbon trading will not reduce emissions. All it will do is circulate more cash to those who want to gamble. We're going to trade carbon credits overseas within 3 years even though carbon trading has been proven unsuccessful. How will any of this help control global warming?
This is the biggest scam we've ever been dragged into.
It is a shame because the success of the whole plan actually relies on the carbon market driving the price of CO2 up to force emissions reduction. And commentators will only be able to hold carbon operators to account if they quickly figure out how 'climate commodities' and 'cap and trade' really work.
The first component of the mechanism - 'cap' - is the 'hard pill' really aimed at addressing pollution. Authorities determine by how much greenhouse gas emissions must be cut year after year to have a positive effect on climate.
The difficulty in getting the cap right comes from the incredible complexity of modelling the climate. Whilst we do know that pollution damages it, we lack data to ascertain what socially optimal level of emissions will invert those damages. This is what exposes the chosen levels of cap to endless debates and lobby agendas.
If the cap is too high it won't have any effect, which is exactly what happened on the European ETS from 2005 to 2007. The 2007 cap turned out to be 8.3% higher than the 2005 verified emissions level and CO2 emissions actually went up. Ironically they decreased during the Global Financial Crisis because of the slowdown of industrial activities, not because of the ETS.
The second component of the scheme is the 'trade' of carbon allowances. Rather than reducing emissions, it is the 'sweetener' designed to help polluters swallow the 'cap pill'. Targeted CO2 reductions are translated into quantifiable commodities, 'allowances', which are auctioned by governments to industries and banks, just like shares when state-owned companies are privatised.
Then the trade kicks in. Those who find it expensive to physically reduce emissions can buy those allowances to keep polluting, whereas companies that easily switch off CO2 and exceed their reduction commitment can sell their surplus to those who have failed to clean up their act.
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