Carbon markets have been widely promoted as the only way to generate enough money to enable industries and countries to reduce their carbon dioxide emissions, which are largely responsible for global warming. The only problem is that nearly 20 years after their 
conception, they have failed to work, and have also been subject to fraud 
and other financial crimes.

Interpol, the world's leading policing agency, has warned that carbon market 
schemes are easily taken advantage of by organised crime.

Earlier this year, carbon credits worth 38 million dollars went missing in 
the European Union's carbon market after funds were transferred by computer 
hackers from the Czech Republic to Poland, Estonia and Liechtenstein before 
disappearing. That was the fourth time funds had been stolen or mislaid.

"A lawyer formerly involved in carbon trading told me that if markets are 
still trading carbon 10 or 15 years from now, then the global environment 
will be in very big trouble," Steve Suppan, senior policy analyst at the 
U.S.-based Institute for Agriculture and Trade Policy (IATP), told 
Tierramerica.

"Carbon markets are open to fraud, misrepresentation and deceptive 
promotion," Suppan said in an interview at the United Nations Framework 
Convention on Climate Change (UNFCCC) negotiating sessions held in Bonn Jun. 
6-17.

These markets have had huge support from governments and they still do not 
work to effectively reduce greenhouse gas emissions, said Suppan, whose 
organisation works on trade, agriculture and environmental issues.

Climate change is the result of emissions of global warming gases, mainly 
carbon dioxide from the burning of fossil fuels.

The two main ways to address the problem – known as mitigation – are to 
reduce those carbon emissions at source or to capture and store 
("sequester") carbon in plants, trees and soils. The latter means reducing 
deforestation, increasing reforestation, and utilising sustainable 
agriculture and grazing practices to either keep carbon stored or encourage 
its capture.

Markets are widely believed to be the only way to mobilise enough private 
capital to reduce emissions, but this is simply not true, says Jutta Kill of 
SinksWatch, a UK-based NGO that tracks and scrutinises carbon sequestration 
projects.

"There is an assumption we can't get the necessary money for mitigation any 
other way," Kill said at an event here. "And there is another assumption 
that money is the answer."

In the early 1990s, when the Kyoto Protocol was being debated at UNFCCC 
negotiations, no one wanted markets as part of a climate agreement except 
the United States, says Payal Parekh, a Swiss-based climate scientist and 
energy expert.

Finally, however, Europe and other countries "did a deal with the devil" and 
the Protocol, which obligated industrialised nations to reduce their 
emissions by five percent between 2008 and 2012, was signed in 1997, Parekh 
told Tierramérica.

The United States subsequently refused to ratify the Protocol and backed out 
of the entire agreement. However, their market component remained.

That legacy has resulted in carbon offset markets which allow rich countries 
in the North to invest in "emissions-saving projects" in the South while 
they continue to emit carbon.

The biggest of these offset markets is the UN's Clean Development Mechanism 
(CDM), with almost 3,200 registered projects so far in Africa, the 
Asia-Pacific region, eastern Europe and Latin America and the Caribbean.

The CDM has been widely criticised because in order to actually reduce 
emissions, the money the North invests has to be in emission-reduction 
projects that would not have happened without that investment.

That requires expert, independent verification and a "crystal ball" to know 
whether or not a wind farm in China would have eventually been built with or 
without CDM money, said Parekh.

"The evidence is clear that it hasn't worked," she said, citing various 
studies that estimate that 20 to 90 percent of CDM projects do not result in 
lower emissions overall.

"Industrialised nations could have met their Kyoto obligations without 
markets," she added.

The world's biggest carbon market is the EU Emissions Trading System (EU 
ETS), which accounted for 95 percent of the 144 billion dollars in carbon 
transactions in 2010.

Not only has it been subject to fraud, with more than 100 people in several 
countries charged last year, but it also does not put much money into 
emission-cutting projects.

"Only a small fraction" of the money "actually makes it into the ground," 
said Kill.

The EU ETS was set up wrong and has had numerous problems, including 
speculation and fraud, agreed Parekh and Suppan. "Studies show it really 
wasn't the main driver of Europe's emission reductions," said Suppan.

"There are a number of other alternatives to markets, such as a financial 
transaction tax," said Parekh.

A coalition of labour, development and environmental groups called on 
negotiators here in Bonn to seriously consider pushing for a small tax of 
less than one cent on financial transactions.

Not only would this generate an estimated 200 to 600 billion dollars a year, 
it would also discourage market speculators, said Bob Baugh, representing 
the U.S. labour organisation AFL-CIO.

"Everyone talks about the need for a Green Climate Fund (to help developing 
countries cope with climate change), but no one wants to talk about how to 
pay for it," said Baugh in a press conference.

France and Germany and even the International Monetary Fund also think the 
financial transaction tax is a good idea, he said. "It is time for the 
financial industry to do the right thing," he added.

This story was originally published by Latin American newspapers that are 
part of the Tierramérica network. Tierramérica is a specialised news service 
produced by IPS with the backing of the United Nations Development 
Programme, United Nations Environment Programme and the World Bank.  
  

---