Needed: A law to curb carbon trade

What’s more worrying than global warming? For many, it’s the absence of a legitimate law to deal with corrupt emission practices.

When scientists established a relationship between greenhouse gases and global warming, more than 180 countries responded by ratifying the Kyoto Protocol, which caps emissions in industrialised countries at 5% below their 1990 levels.

Kyoto has several market mechanisms intended to ensure that the required cuts can be made efficiently. One of them is the Clean Development Mechanism (CDM), in which private and public sectors can invest in emission reduction projects in developing countries and receive credits, which are tradable in ‘compliance markets’ and can be bought by emitters to offset their own emissions.

But carbon is at the centre of a flourishing ‘black trade’. A report on accountability says carbon markets have grown exponentially since the late 1990s. By 2007, 2.7 billion tonnes of carbon-dioxide-equivalent emissions valued at $40 billion had been traded, of which about one-third were CDM. 

The future of these markets will depend on whether further reductions happen after the Kyoto Protocol expires in 2012. Even in a low-growth scenario, the market will probably be several times larger than now.

Certain offsets allocated to markets underlines the fact that carbon saving markets are political constructs in which products, values and distribution are shaped by rules, which become the focus of lobbying, some of which might degenerate into corruption. Against this, it is striking that evidence about corruption in the market is rare.

A growing market for emissions trade is the answer to climate change, but it faces transparency issues. “Sovereign wealth funds have emerged powerful actors in the arena. As managers of significant portions of nations’ public wealth, they should live up to high standards of public transparency and accountability,” says Transparency International. But many fail to do so. 

What’s needed immediately is an indigenous law to protect the industrial environment from a global onslaught.