The buying and selling of carbon credits, the right to emit carbon dioxide, is not delivering the emission cuts promised, says a report from Friends of the Earth.
The trade in carbon permits and credits, mainly based in Europe, was worth $126 billion in 2008 and is predicted to balloon to $3.1 trillion by 2020 if a global carbon market takes off.
But instead of being a trade between polluting industries it has become one dominated by banks and speculators making big profits, says the report.
Speculation
Friends of the Earth says this speculation and complexity has left the carbon trade exposed to 'high risk'. The group worries that plans for an expanded global trading scheme could at some point lead to a 'sub-prime'-style collapse of confidence in the market.
'When you buy a carbon credit on the open market there is almost no way of knowing if any carbon has been reduced as a result,' said Iain Thom, from the Carbon Accountability Programme.
'Accountability and traceability is key to public confidence any environmental claims, and the current carbon market lacks both,'
Carbon taxes
Friends of the Earth said that instead of carbon trading and offsetting, governments should use simpler tools like carbon taxes and major public investment in green technology to reduce emissions.
'Carbon trading is failing dismally at reducing emissions, yet allows speculators to grow rich from the climate crisis and hands politicians and industry a get-out clause for polluting business as usual,' said Friends of the Earth's international climate campaigner and author of the report, Sarah Jayne-Clifton.
'The credit crunch has taught us that governments, not markets, are best placed to safeguard our future - at this critical point in the fight against climate change Ministers must step in and lead the way with a new, direct approach to tackling carbon emissions to create a safe and green future for us all.'
Emission cuts too weak
The critical analysis of the carbon trading market comes as other environmental groups warned that current emission reduction targets were inadequate for a carbon market to be successful.
Greenpeace, WWF and Germanwatch said the markets would not provide the necessary finance to help developing countries adapt to climate change.
'Industrialised countries claim that carbon markets will deliver the missing numbers on finance but their pathetically low targets will
generate nothing like the amount needed to help developing countries shift to a low carbon economy,' said Kaisa Kosonen, Climate Policy Advisor, Greenpeace International. 'It is clear that carbon offsets are no substitute for new and additional public finance.'
Useful links
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