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Carbon trading could trigger the next subprime-style crisis. Many developed country governments want to see the trading expanded into a massive worldwide market. They are pushing in the negotiations running up to the Copenhagen climate talks in December.
Expansion of the market could lead to another financial collapse and fail to protect the world from global warming according to a report* from the environmental activist organisation Friends of the Earth.
The report says the buying and selling of carbon permits and credits, what the report calls an ‘artificial commodity’, the right to emit carbon dioxide, is mainly based in Europe. Last year the market was worth $126 billion and is predicted to grow to $3.1 trillion by 2020 if a global carbon market takes off.
The majority of the trade is carried out between banks and investors who are also packaging carbon credits into increasingly complex financial products similar to the ’shadow finance’ around sub-prime mortgages which triggered the recent economic crash, claimed the report.
This risks the development of subprime carbon and the possibility of an eventual collapse in confidence in the market, said the report.
The report also warned that the policy of carbon trading as a solution to climate change is high risk, irresponsible and dangerous, particularly as advocated by the UK government.
“Pushing a world carbon market as part of a global agreement to tackle climate change risks a double whammy of financial and environmental disaster,” said Sarah Jayne-Clifton, author of the report an international climate campaigner for Friends of the Earth.
“The credit crunch has taught us that governments, not markets, are best placed to safeguard our future,” she added.
* A Dangerous Obsession by Sarah Janyne-Clifton, Friends of the Earth.
Author: Margie Lindsay
