The Flaws of Free-Market Solutions for Climate Change Prevention and Their Homology to Finance-Driven Capitalism

After the previous discussion of the neoclassical proponents of carbon trading, this final chapter is dedicated to the problematic and counterproductive aspects of this trading. The experience generated to date by available empirical data on actual carbon-trading schemes has already questioned the contribution of these schemes to climate change mitigation. Furthermore, we have noted some of the flaws in carbon trading using the EU ETS — for instance, the over-allocation of certificates and windfall profits for energy companies (see Chapter 13). Against this backdrop, some observers have even dismissed, ironically, the Kyoto Protocol’s ‘flexible mechanisms’ as ‘hot air’, while apologists argue that both Kyoto and the EU ETS are to be understood as ‘learning processes’ on the road towards ‘more universal and rigorous formulae’ (Giddens, 2009, p. 189). We will now discuss whether the flaws and problems of carbon trading systems should be viewed as the ‘teething troubles’ of an emerging policy instrument or whether they are endemic and likely to persist. I will comment on issues such as the over-allocation of certificates and windfalls for greenhouse gas emitting companies, self-reporting of CO2 emissions, carbon price volatility, offsetting or CO2 reduction duties, the problem of ‘additionality’, geographic distribution, size and content of clean development mechanism (CDM) projects, the bureaucracy and the cost element of carbon-trading schemes and their possibly innovative effect.