Carbon Markets: The never ending fairytale

Once upon a time, not so long ago, world leaders gathered to make an agreement to fight climate change. They met in Japan and agreed to the famous Kyoto Protocol. A principal feature of the Protocol turned out to be carbon trading: a magical solution to curb CO2 emissions. It was presented as a flexible market mechanism able to tackle climate change in a cost effective way. The magical elements were carbon credits, who reached the status of superheroes once their full potential was discovered.

Governments and companies could buy carbon credits but most of the time they just got them for free. If they had credits or permits left they could sell them and make nice profit out of it. Either ways the result would be the same, as if by magic, carbon emissions would reduce rapidly, it was predicted. No political action was needed, the market would take care of it.

Expectations were high but unfortunately the magic never happened and promises couldn’t be kept. The biggest carbon market, the EU Emissions Trading Scheme, has crashed, carbon trading hasn’t reduced CO2 emissions and it hasn’t encouraged investments in sustainable energy infrastructure sufficiently. To the contrary, to offset their CO2 emissions companies and governments have invested in destructive projects in the South. The only ones benefiting from this system are polluting companies who have made millions by selling their free carbon credits and traders speculating on the fluctuation of their price.

Reasons enough to change strategy one would think, right? Well think again. Despite the massive evidence of their failure, carbon markets are still promoted as a solution to fight climate change. Carbon markets are being expanded to other regions and similar mechanisms are being set up to trade not only clean air but also forests, wetlands and other elements of nature.

Sixteen years after Kyoto carbon markets will still be central during the next climate talks in Warsaw (UNFCCC COP 19). The fairytale is kept alive by those who want us to believe in it. It is being told again and again in a slightly different version every time. But the big success factor remains no matter what: Carbon Credit! (The only superhero who smokes).