Copyright 1998 The National Post (Canada)

Emissions trading: a market in hot air
Editorial by Peter Foster
November 4, 1998

Much will be heard at Buenos Aires this week and next about emissions trading as a "free-market" solution to Global Warming. That's like insisting that the Emperor's new clothes be washed at a private-enterprise laundry. Emissions trading is promoted as a "least-costly solution," but the first question should be: To what?

The vast majority of businessmen have now given up debating whether man-made global warming is a real phenomenon, retreating to the position of meeting the political demands engineered at Kyoto last year as cheaply as possible.

In theory, emissions trading is certainly superior to command-and-control methods. It reduces overall costs by enabling those who can cut emissions most cheaply to sell "credits." These credits are certificates representing such virtual commodities as 1,000 tons of carbon dioxide which has not been put into the atmosphere. Where would such phantasmagoric non-commodities originate? Only, of course, in bureaucratic fiat.

Companies would be given certificates to emit fixed amounts of specific chemical compounds. A commissar would then have to be posted at each smokestack so that emissions could be monitored and transgressions punished. Given the potential global power that the issuing, monitoring and trading of such credits implies, it was perhaps inevitable that we should find at the middle of this scheme none other than ecocrat Maurice Strong, Canada's global ambassador for good intentions and bad policies.

At the end of August, Strong solicited members for a Geneva-based entity called the International Emissions Trading Association (IETA). IETA's sponsors are the Earth Council, an organization set up by Strong to promote the interventionist agenda he orchestrated at the Earth Summit in Rio in 1992, and the United Nations Conference on Trade and Development (UNCTAD).

Strong has grand plans for IETA, to which 35 major corporations including BP, Shell and GM have reportedly already been recruited. According to the Earth Council "[T]he Association aims to become one of the first truly independent international verifiers of company emissions reports and carbon credits, and issue certificates that can facilitate trading."

This implies awesome power, not the least of which is to manufacture credits out of thin air. Literally.

Strong not only wants to be the referee of this new market in "bads" rather than goods, he has also lined himself up as one of the first players, creating -- in co-operation with the government of Costa Rica -- trading instruments known as Costa Rican "Carbon Bonds."

Costa Rican Carbon Bonds -- which require a Jonathan Swift to do them justice -- are certificates of non-pollution backed by swathes of rainforest that will allegedly not be cut down as the result of a huge state land grab.

Of course, by manufacturing rights to pollute, Costa Rican Carbon Bonds are in fact a licence to increase rather than decrease pollution. Meanwhile, the only place where these credits could possibly be considered to have any value at the moment is the United States, where emissions-trading is already taking place (although Strong considered buying Costa Rican clean air when he was head of Ontario Hydro). The possibility of U.S. sales brings us back to the first-mentioned of Strong's myriad hats: that of promoter of the International Emissions Trading Association.

IETA has already run into a prospective turf fight with the Milwaukee-based Emissions Marketing Association, which said that UNCTAD had no right muscling its way into the business. More relevant, however, to the Swiftian undertones of the whole exercise are the circumstances of the EMA's own existence.

EMA members deal in government-mandated pollution credits for substances such as sulphur dioxide, which was originally feared as a cause of acid rain. We don't hear much about acid rain any more.

Did emissions trading solve the problem? Not exactly. The truth is that the problem was grossly exaggerated in the first place. A 10-year, $500-million (US) study, the National Acid Precipitation Assessment Program (NAPAP), concluded in 1990 that acid rain posed little or no threat to forests, crops, human health or lakes. The publication of the report, which was virtually ignored, was delayed until after the passage of the Clean Air Act amendments of 1990, which spawned emissions trading in the U.S.

The "success" of the U.S. trading system, which was encouraged by the Environmental Protection Agency, is reckoned to be measured by the fact that compliance is currently costing "only" $2-billion (US) annually vs. the $5-billion (US) that was initially estimated. Nobody bothers to ask if acid rain was ever a $2-billion-a-year problem in the first place.

Before everybody rushes down the road in search of least-costly solutions to more exaggerated, or possibly even non-existent, problems, it is worth thinking about where the road might be leading. Despite powerful support for the concept from the U.S. government, some undoubtedly see emissions trading as yet another guidance mechanism for taking Spaceship Earth towards Planet Marx.