1402 No to Carbon Trading and to Infinite Growth

© Center for Progressive Reform

Climate scientists have called for urgent measures to reduce greenhouse gas (GHG) emissions globally in order to avoid a temperature increase of 3 to 4 degrees C° before 2100. Such an increase will cause polar ice to melt, increasing sea levels by approximately 25 meters and this will wipe from the map several cities and entire islands. Increased temperatures will also destroy ecosystems compromising global food security and certain places will become uninhabitable for humans and other species.[1] So it is fair to say that climate change is one of the greatest challenges for humankind.

In the industrialized world, the European Union (EU) is the most ambitious in committing to emissions reductions. For 2030 the European Commission has proposed a new target of 40% for reducing emissions, which still needs to be approved by the European Council. Environmentalists believe the proposed target is not enough to prevent out-of-control global warming. The key words of the new EU climate package are competitiveness, sustainability, security of energy supply and new opportunities for growth and jobs.[2] But can this neoliberal logic of “infinite growth” be applied to protect the climate in an economy of overconsumption of finite natural resources? 

Setting targets is one thing, but how can we evaluate the methods of the EU to reach them? The cornerstone of the EU’s climate and energy policy will remain the EU Emissions Trading System (ETS). However, there are serious doubts to whether the ETS is effectively reducing emissions. First of all, the ETS reflects just part of the story because it focuses on the producer side of emissions and not all industries are included in the ETS. The ETS combines conventional regulation with market logic: policymakers establish “caps” or limits to Greenhouse gas (GHG) emissions and carbon trading gives incentives to industries to use cleaner technologies in their production processes.

Now, how does this system of carbon trading work? There are two mains mechanisms to the ETS: trading carbon credits and offsetting emissions. Firstly, if an industry pollutes more than the allowed limit, it has to buy carbon credits from other industries that save carbon credits by keeping their emissions under the cap. However, the ETS was launched with a flaw: in the start-up phase permits were GRANTED to polluting industries, which led to an over-allocation of permits. This created a surplus market for emissions, which kept prices for carbon credits low. As a consequence polluting industries had no incentive to effectively reduce emissions at the source because they could buy very cheap carbon credits. Therefore, the most polluting industries, such as coal-fired electricity plants and oil refineries, can postpone investments to convert to low-carbon production. Secondly, polluting industries can also “offset” their pollution by investing or buying carbon credits from clean development projects in developing countries.[3] These projects in developing countries have resulted sometimes in environmental damage and social conflicts (for example displacement of local communities in Tanzania).[4] So at first sight, an artificial and lucrative market to trade paper permits had been created for traders and polluters, allowing them to buy “rights to pollute”. Therefore, it is very unlikely that the ETS has effectively reduced emissions. Scientists believe that about 1/3 to 2/3 of ETS carbon credits do not represent a real reduction of emissions.[5]

It seems that policymakers around the world believe in the possibility of maintaining infinite growth, while ignoring the fact that water, earth, minerals and precious metals are finite resources. Demand is soaring for new gadgets such as tablets, smart phones and laptops. The industry expects to produce 10 billion devices by 2017. Next to this, all new gadgets have short life cycles. The devices are not made to last for 20 years: regular updates and new designs will drive consumers to buy a new version within ever shorter time periods. For example, phone batteries and computer components are difficult and expensive to substitute; as a result consumers would rather buy the newer version than replace the old one. Increasing sales keep the market hungry for natural resources. This requires ever more raw materials, burdening the earth with more pollution from the processing of raw materials, the manufacturing of the electronic gadgets and the transport. Additionally, extractive industries are digging up more and more of earth, because they have to dig deeper to extract the same amount of raw materials, harming ecosystems and biodiversity. According to Gaia “A single gold wedding ring requires the extraction of approximately 20 tons of earth, or rather living ecosystems.” On top of that, a single electronic device often contains several metals, for example a mobile phone contains copper, tin, coltan, cobalt and gold. This will lead to continued pollution from mining in poor countries as well as the search for new mining areas which risks displacing people which in turn can lead to violence. To make matters worse, industrialized nations dispose of their electronic waste (e-waste) from their gadgets in poor countries causing pollution and harming human health.[6] 

Growth at all costs and profit-maximization is very difficult to reconcile with environmental protection.  The ETS reinforces the logic of overproduction and overconsumption that is depleting the Earth’s resources and is polluting the environment. The EU’s climate policy is enshrined in the logic of economic growth and is disconnected from real solutions to climate change. Therefore the EU’s climate policy should rather focus on reducing energy consumption and sustainable management of natural resources.  Key concepts might be a restorative economy and “closing the loop”: by recycling products and by prolonging their lifecycle. Land, water, minerals, energy and biomass should be used sustainably for ourselves and especially for the next generations. 

Gino Brunswijck

AEFJN Policy officer