The Political Economy of Carbon Markets

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Book Review. Upsetting the Offset: The Political Economy of Carbon Markets. Edited by Steffen Böhm & Siddhartha Dabhi. UK:  MayFlyBooks, 2009

reviewed by Martin Empson
(from Socialist Review, February 2010)

The failure of the Copenhagen climate talks to reach agreement on limiting emissions has angered millions of people. But this masks a far greater systemic problem with strategies to deal with climate change. Following intensive lobbying by a US delegation to the Kyoto conference in 1992, led by Al Gore, market mechanisms, particularly carbon trading, became the favoured method for reducing pollution. These schemes are now worth billions of dollars but have had very little impact.

This new collection of essays examines the economics behind carbon trading, the impact of such schemes through various case studies and the inherent problems with market solutions.

Carbon trading seems logical. It is based on the idea that an amount of carbon dioxide emitted in one part of the world is the same as an equal amount released elsewhere. With this simple equation, you can wave an economic magic wand and claim that a certain amount of pollution in one part of the world can be “offset” by absorbing, or preventing the production of, an equivalent amount elsewhere.

It is on such simplistic foundations that multi-billion dollar businesses are built. In a powerful essay Larry Lohman points out that offsetting projects have led to the funding of “gas pipelines, fossil fuel-fired generating plants, coal mines and oil wells.” In one example, a 500 megawatt gas power station was built in Oregon in the late 1990s. In order to neutralise the impact of constructing a large fossil-fuelled power station, the company invested in a loan scheme to introduce solar power to remote villages in Sri Lanka.

Because the scheme was introduced via local plantation owners, it worsened the indentured debt that local workers suffered. By giving the panels to one ethnic group and not the others, ethnic tensions were exacerbated, leading to physical attacks. Many people also worried that the introduction of solar panels would mean that their villages would never get “on the grid,” leaving them further isolated and impoverished.

This happens as the power station continues to belch out carbon dioxide. These schemes aren’t simply faulty because they might not work or are implemented badly. Many of the essays in this book point out that they also have the effect of entrenching the status quo – after all, if you can simply offset emissions, why bother investing in renewable energy?

Attempting to use market mechanisms to solve environmental crisis, based as they are on the drive to make a profit, is doomed to failure. These essays are a powerful criticism of these schemes and the capitalist logic that creates them. It’s disappointing then that the “alternatives” offered in the final chapters of the book don’t explore this further. We are offered strategies that are based on creating a more sustainable niche within capitalism.

This criticism aside, the book is worth reading for a clear exposé of just how rotten our leaders’ attempts to deal with climate change are. It is powerful ammunition for those who want to argue that the market is the problem, not the answer.

Upsetting the Offset is available as a free PDF download (4.5 Mb), or it can be ordered online from MayFlyBooks.

Martin Empson is the author of Marxism and Ecology: Capitalism, socialism and the future of the planet