The fool’s gold of carbon trading - Times Online
The fool’s gold of carbon trading
A huge new market designed to solve global warming seems doomed to failure
It was a deal to make Alistair Darling hug himself with glee. Just as the world’s existing financial markets were hitting a five-year low two weeks ago, the Treasury raked in a cool £54m from a brand new one. The occasion was Britain’s first auction of CO2 permits. Almost 4m were knocked down to greenhouse gas emitters in a sale that was four times oversubscribed. The government expects to sell 80m more over the next four years, raising a further £1 billion.
We are witnessing the birth of the greatest and most complex commodity market the world has seen. Last year alone, permits worth more than £55 billion were traded on the world’s carbon markets – but future trading volumes, if all goes global according to plan, will dwarf these.
Carbon trading schemes originate from the Kyoto protocol on climate change agreed under the auspices of the United Nations in 1997. Governments adhering to Kyoto accept limits on the CO2 their countries can emit.
To meet their pledges, they put caps on the carbon outputs of domestic companies, which have to buy annual permits to exceed them.
Permits are bought from governments or from carbon traders, who, naturally, charge a commission. For the City the arrival of carbon trading is a bonanza.
The sector already employs about 3,000 people and has created a few dozen new millionaires.
As we are too painfully aware, the issue of climate change is not one of an environmental issue, it is one of a financial market issue.
Do we see airlines subjected to irrelevant taxation through 'environmental' policy, which does nothing but increase revenue to the state, and then coupled with restrictive caps requiring airlines to purchase on the commodities market permits to operate, thus increasing operational costs yet again?