Carbon Emission Trading - Criticisms

Criticisms

One criticism of carbon trading is that it is a form of colonialism, where rich countries maintain their levels of consumption while getting credit for carbon savings in inefficient industrial projects (Liverman, 2008, p. 16). Nations that have fewer financial resources may find that they cannot afford the permits necessary for developing an industrial infrastructure, thus inhibiting these countries economic development. Other criticisms include the questionable level of sustainable development promoted by the Kyoto Protocol's Clean Development Mechanism.

Another criticism is of non-existent emission reductions produced in the Kyoto Protocol due to the surplus ("hot air") of allowances that some countries have. For example, Russia has a surplus of allowances due to its economic collapse following the end of the Soviet Union (Liverman, 2008, p. 13). Other countries could buy these allowances from Russia, but this would not reduce emissions. Rather, it would simply be a redistribution of emissions allowances. In practice, Kyoto Parties have as yet chosen not to buy these surplus allowances (PBL, 2009).

In China some companies started artificial production of greenhouse gases with sole purpose of their recycling and gaining carbon credits. Similar practices happened in India. Earned credit were then sold to companies in US and Europe.

Critics of carbon trading, such as Carbon Trade Watch, argue that it places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. Groups such as the Corner House have argued that the market will choose the easiest means to save a given quantity of carbon in the short term, which may be different to the pathway required to obtain sustained and sizable reductions over a longer period, and so a market-led approach is likely to reinforce technological lock-in. For instance, small cuts may often be achieved cheaply through investment in making a technology more efficient, where larger cuts would require scrapping the technology and using a different one. They also argue that emissions trading is undermining alternative approaches to pollution control with which it does not combine well, and so the overall effect it is having is to actually stall significant change to less polluting technologies. In September 2010, campaigning group FERN released "Trading Carbon: How it works and why it is controversial" which compiles many of the arguments against carbon trading.

The Financial Times published an article about cap-and-trade systems which argued that "Carbon markets create a muddle" and "...leave much room for unverifiable manipulation". Lohmann (2009) pointed out that emissions trading schemes create new uncertainties and risks, which can be commodified by means of derivatives, thereby creating a new speculative market.

Recent proposals for alternative schemes to avoid the problems of cap-and-trade schemes include Cap and Share, which was being actively considered by the Irish Parliament in May 2008, and the Sky Trust schemes. These schemes state that cap-and-trade or cap-and-tax schemes inherently impact the poor and those in rural areas, who have less choice in energy consumption options.