[For the Bfest, Athens, Greece, May 30, 2010]
There is a growing divide among Leftists over how to respond to the threat of climate change. On the one hand many progressive environmentalists are fighting to keep the United Nations Framework Convention on Climate Change (UNFCCC) in control of negotiations, to preserve positive features of the Kyoto Protocol, and to respond to valid criticisms of carbon trading by fixing the cap and trade framework to be more effective, fair, and efficient. On the other hand, spokespersons for climate justice (CJ) and anti-capitalist (AC) movements routinely denounce UNFCCC negotiations and Kyoto as “pretend solutions” and reject cap and trade policies altogether. I want to spend my time here today to explain (1) why many CJ and AC arguments are based on faulty economic analysis, (2) why support for the UNFCCC and an improved cap and trade post-Kyoto treaty is critical if we are to avert climate change, and (3) why supporting an international treaty with carbon markets is perfectly consistent with calls for eliminating the capitalist market system. I suspect this is quite contrary to what most of you have been led to believe, and not what you expected to hear from one of the few professional economists who has long declared himself to be a market abolitionist.
CJ and AC Criticisms of Carbon Trading
In October 2004 the Durban Declaration was issued by a network of CJ organizations including Climate Justice Action, Climate Justice Now!, Third World Network, Focus on the Global South, and the Peoples Climate Justice Movement. The Declaration stated: “As representatives of people’s movements and independent organizations, we reject the claim that carbon trading will halt the climate crisis…. We denounce the further delays in ending fossil fuel extraction that are being caused by corporate, government and United Nations’ attempts to construct a carbon market.”
In December 2009 a larger network of CJ and AC organizations demonstrating in Copenhagen issued System change – not climate change: A People’s Declaration from Klimaforum09. The Clean Development Mechanism (CDM) and Reducing Emissions from Deforestation and Degradation (REDD) are described in the document’s summary as “market oriented, false and dangerous solutions” which the signatories “reject.” The Klimaforum09 declaration emphasizes that “no false, dangerous, and short-term solutions such as offsetting and carbon trading should be promoted and adopted.” In section 4 the declaration states that the CDM and REDD “only produce new environmental threats, without really solving the climate crisis,” that “carbon trading and offsetting are false and unjust,” and that “allowing rich countries to offset their reduction obligations has maintained the unjust and unsustainable system.”
On April 26, 2010 the World People’s Conference on Climate Change and the Rights of Mother Earth, attended by more than 40 official government delegations, thousands of activists and representatives of social organizations, and hosted by the President of Bolivia, Evo Morales, issued the People’s Agreement on Climate Change and the Rights of Mother Nature. Among other things the Cochabamba Protocol declared “we condemn market mechanisms,” “the carbon market has become a lucrative business and is not therefore an alternative for tackling climate change,” and “we consider inadmissible that current negotiations propose the creation of new mechanisms that extend and promote the carbon market.” The Protocol specifically condemns REDD which it describes as “violating the sovereignty of peoples… the customs of peoples, and the Rights of Nature.”
What CJ and AC Critics Have Right
Has not the Left been a lonely voice of wisdom insisting that climate change, as well as other forms of environmental deterioration, cannot be avoided if we fail to replace the economics of competition and greed — a.k.a. capitalism – with the economics of equitable cooperation – a.k.a. true eco-socialism? Are we not the ones who point out that capitalism is an economic way of life that has no future because it will soon destroy the biosphere? Are we not the ones who have explained why even a better regulated and more egalitarian capitalism would still mistreat the environment because: (1) Capitalist economies pollute too much because markets over produce goods whose production and/or consumption generate negative “externalities” like pollution. (2) Capitalist economies fail to protect the environment sufficiently because markets under supply “public goods” like environmental restoration. (3) Capitalist economies extract natural resources too fast because rates of profit for private owners are higher than the rate at which society should “discount” future compared to present benefits from using natural resources. (4) Markets for labor and consumer goods create “perverse incentives” which lure people to take too much of their productivity gains as individual consumption and too little as more environmentally friendly collective consumption and leisure time. And finally, (5) markets fail to generate information necessary to know how high corrective environmental taxes and subsidies should be, while spawning powerful political lobbies with interests in underestimating the size of necessary correctives. (See Robin Hahnel, “The Case Against Markets,” Journal of Economic Issues (41, 4), December 2007: 1139-1159.)
Where CJ and AC Critics Go Wrong
However, for all our wisdom about how the defining features of capitalism bear primary responsibility for turning humans into lemmings, too many on the Left have made themselves irrelevant to responses to climate change in the here and now by failing to understand the importance of putting a significant price on carbon emissions, and by dismissing cap and trade policies out of hand Unfortunately, as long as the albatross of global capitalism remains around our necks our best chance to avert climate change is through an international cap and trade treaty that puts a significant price on carbon emissions, and our best chance to do this equitably is to preserve the Kyoto framework and fix the carbon market that is one of its central features.
The first problem is that many CJ criticisms of carbon trading are simply wrong, because apparently many CJ spokespersons do not understand how the international carbon market works. They think that if a power plant in Japan instead of reducing its own emissions buys certified emissions credits in the international carbon market from a power plant in Canada, but in truth the power plant in Canada makes no reduction in emissions, i.e. the credits are completely bogus, this means that global emissions reductions will be undermined. They think that because there were no reductions at the plant in Japan which purchased credits instead, and no reductions at the plan in Canada either since the credits were bogus, this trade punctures a hole in the cap on overall, or global emissions. This is wrong. As long as national emissions are capped for Canada – as they are under Kyoto – the sale of bogus credits by a Canadian company to a Japanese company cannot puncture a hole in the cap on global emissions. Because the cap on national Canadian emissions will force someone else in Canada to make up for the bogus sale, global emissions reductions will be exactly what they would have been had no bogus sale taken place.
Critics also insist that measuring emission reductions is very difficult, and therefore large scale cheating will go undetected. They fail to understand that measuring annual, national emissions – which is all an international cap and trade treaty must measure and enforce – is not difficult, but straightforward and non-controversial. What is difficult to measure is how much a particular project reduced emissions, above and beyond what would have taken place in any case, because this requires establishing a hypothetical baseline to measure what is called “additionality,” and verify that there was no “leakage.” But as long as sources selling emission reduction credits are located in countries where national emissions are capped any mistakes in assigning credits do not undermine efforts to reduce global emissions as CJ critics charge.
Critics also claim erroneously that whenever a source in a more developed country which has a national emission cap under Kyoto buys emission credits from a source in a lesser developed country without a national emission cap, this necessarily undermines global efforts to reduce emissions since there is no limit on emissions from the country selling the credits. This is also untrue. As long as the Executive Board of Kyoto’s Clean Development Mechanism awards credits correctly, global emissions reductions will not be undermined by sales of credits from sources in uncapped countries to sources in countries with caps.
The only case in which CJ criticism of the international carbon market as it works today is accurate is when bogus credits are sold by sources in LDCs without national caps. But even here CJ critics refuse to acknowledge that this problem can be easily fixed by capping annual national emissions in LDCs in a post-Kyoto treaty, which can be done without imposing any hardship on those countries by setting their caps well above their current emission levels, as supporters of the Greenhouse Development Rights Framework have proposed.
But beyond incompetent criticisms of international carbon trading which seriously undermines the credibility of the CJ movement, lies a fundamental confusion over the relationship between “system change” and reforms needed today to avert climate change. It is one thing to point out the ultimate absurdity of putting prices on different parts of a natural environment which is, in fact, a single interconnected ecosystem that all life, including human life, depends on. It is another thing when we live in a world driven by market forces to denounce those who work to increase the price of carbon emissions from its present price of zero to as close to its true social cost as is politically possible. It is one thing to insist that nature should belong to no one and everyone. It is another thing to sit on the sidelines while giant corporations seize valuable property rights to store carbon in the upper atmosphere in the greatest wealth give-away in history, while ordinary citizens receive none because one does not believe the atmosphere should be commoditized. It is one thing to point out that it would be better to plan how to use and preserve the natural environment in a democratic, equitable, and effective way rather than leave those decisions to be made very poorly by market forces. It is another thing to ignore the fact that we failed to replace capitalism with libertarian socialism in the twentieth century, which means that decisions about how to use the environment are actually made, and will continue to be made for some time, by market forces where a key price, the price of carbon emission, is completely out of whack. Finally, it is one thing to say: “I don’t want things decided by market forces and private property rights.” It is quite another to say: “Even though things are being decided by market forces and property rights I don’t care what those prices are or who gets new property rights.”
Prospects for the human and other species do ultimately hinge on whether global capitalism is replaced by a completely different economic system — a system with no elites to prey on their fellow humans and the natural environment, where the associated producers and consumers democratically plan and coordinate their own economic activities based on reasonably accurate information about the consequences of different alternatives. And the sooner this happens the safer and better off both humans and the environment will be. But when dealing with climate change it is irresponsible not to be realistic about time frames. Being realistic about time frames does not mean we must abandon our conviction that humans are capable of correcting our errors and forging new economic institutions to help us develop more democratic, equitable, and environmentally sustainable habits. Being realistic about time frames does not mean we must cease or postpone our efforts to replace a dysfunctional system that commodifies everything but knows the value of nothing with an economic system that facilitates equitable cooperation and environmental stewardship. But being realistic about time frames does mean recognizing that the global economy will continue for some time to be dominated by giant corporations guided by the profit criterion and market forces — while nature proceeds on its own schedule.
As a self-proclaimed “market abolitionist” I understand why this conclusion is a bitter pill to swallow for all who abhor the commodification of everything, including the natural environment. But we need to look to ourselves. Had we done our work well the human species would have abandoned capitalism and the false illusion that commodification is the solution to all economic problems long before we had damaged the environment to the point where we are perilously close to triggering cataclysmic climate change. Had libertarian socialism replaced capitalism during the twentieth century — as it should have – we would be in a position to respond to the threat of climate change very differently: Once scientists made us aware of the consequences of inaction we would have had well-tested institutions and procedures at our disposal for making efficient and equitable choices about where and how to reduce carbon emissions, and how to distribute the costs of reductions fairly between and within countries without resort to commodification. But last I checked, participatory eco-socialism had yet to replace global capitalism, and pretending it has does not yield effective policy responses in the world we live in.
Demands: A Tale of Two Lists
Climate Justice Action Demands:
1. Leave fossil fuels in the ground.
2. Reassert peoples’ and community control over production.
3. Relocalize food production.
4. Massively reduce overconsumption, particularly in the North.
5. Respect indigenous and forest peoples’ rights.
6. Recognize the ecological and climate debt owed to the peoples of the South and make reparation.
These were the six demands that Climate Justice Action groups marched under in Copenhagen. They are all fine suggestions. However, they fail to engage the actual struggle going on over what climate policy will look like because they do not address the primary issues that must be addressed now. They are what the Old Left called “symbolic demands.”
What progressives, environmentalists, and CJ and AC activists can and should unite around is a very different list of six programmatic demands.
1. Countries must recommit to the Kyoto path which is: (a) The necessity of binding caps on national emissions agreed to jointly and enforced by an international treaty. And (b) sharing the costs of averting climate change according to differential responsibilities and capabilities.
2. Let science determine the global cap. Right now as best we know we need to stabilize concentrations at no greater than 350 ppm by 2050.
3. Cap emissions in all countries, but very differently.
4. Assign caps according to the Greenhouse Development Rights Framework formula based on cumulative emissions and per capita income.
5. Cap NET emissions, not emissions.
6. Make national governments the “sheriff” for certifying any carbon emission credits, CERs, sold by residents to foreigners.
These demands directly address the fundamental policy areas that governments and constituencies are struggling over with regard to international climate policy. They would set us firmly down the only road that can lead to a just solution to the danger of climate change. And they are realistic, with a reasonable chance of uniting sufficiently powerful political constituencies to make headway before it is too late.
Once we win demand 1 and demand 2 we will be assured (a) the treaty is effective, i.e. it really will reduce the risk of cataclysmic climate change to an acceptable level, and (b) even if bogus carbon credits are traded this will not puncture holes in the global emission cap. Once we win demand 3 we will have (c) distributed the costs of averting climate change fairly and not denied anyone, living anywhere the right to benefit from economic development, and (d) carbon trading will generate a massive annual flow of income from richer to poorer countries without resort to acrimonious debates over climate reparation payments unlikely to lead anywhere. When we win demand 4 existing perverse incentives with regard to deforestation will be eliminated and there will be positive incentives for carbon storage and sequestration. And while winning demand 5 does not make the difficult job of judging additionality and leakage any easier, it protects the integrity of the treaty in any case, and puts the decision in the hands of a sheriff who must answer to those who are harmed – country nationals — if sellers receive more CER credits for a project than they deserve.
Moroever, there is no reason the CJ and AC movements cannot continue to make their symbolic demands, call for system change, and support these programmatic demands as well. There is only one small problem. The CJ and AC movements must stop rejecting a cap and trade treaty, and must stop their ill-informed carbon market bashing.
It is important to distinguish between CJ and AC criticisms of global capitalism as the fundamental cause of climate change from CJ and AC criticisms of the Kyoto Protocol and carbon trading. I have been arguing the case for economic system change and helping explain why the environment will not be safe until the economics of competition and greed is replaced by the economics of equitable cooperation for over thirty years. However, because our preferred solutions cannot always be achieved immediately, those of us who argue for system change often support and join campaigns to improve outcomes in the meantime.
Just as it makes sense for those of us who call for the end of wage slavery to support workers fighting for wage increases under capitalism, it also makes sense for those of us who call for the replacement of capitalism with eco-socialism to join campaigns for the most fair and effective way to avert climate change while capitalism persists. Our “new world” is both desirable and possible, but because it requires majoritarian support it is unrealistic to pretend it is just around the corner. Unfortunately, responding to climate change cannot wait for system change. And right now only an improved cap and trade treaty can help avert climate change effectively and fairly before it is too late.
It is not inconsistent to fight for reform policies now while calling and organizing for system change as well. Ill-informed criticisms of carbon trading by CJ and AC spokespersons only serves to undermine critical efforts to do what must be done to avert climate change in the here and now.