BusinessGreen: Campaigners warn carbon markets will trigger next sub-prime crisis

[Andrew Donoghue]

Carbon cap-and-trade schemes are a dangerous distraction and could trigger the next sub-prime financial crisis, according to environmental campaigners and academics.
In a report released today, Friends of The Earth says that carbon markets have been hijacked by financial organisations that are creating ever more complex products which echo the mismanagement and greed which initiated the banking and credit crisis.

According to the report, A Dangerous Obsession, the trade in carbon permits and credits, mainly based in Europe, was worth $126bn (£76bn) in 2008 and is predicted to rise to $3.1tn by 2020 if a global carbon market is established.

But rather than being based around the exchange of carbon credits between large polluters, the system has been subverted by speculators creating complex financial instruments, the report states.

"Far from proving to be an economically efficient instrument, carbon trading and offsetting have been beset by inefficiency and, in places, corruption and are set to become the next sub-prime crisis," said professor Steve Rayner, director of the Institute for Science, Innovation & Society at the University of Oxford.

The report says carbon trading is being used as a smoke screen by rich countries to avoid their commitment to help developing nations tackle climate change.

Friends of the Earth wants the government to simplify the approach to regulating carbon by developing a clear carbon tax and investing in technologies to help the UK meet its target of reducing emissions by at least 40 per cent by 2020, without offsetting.

"Pushing a world carbon market as part of a global agreement to tackle climate change risks a double whammy of financial and environmental disaster," said Friends of the Earth’s international climate campaigner and author of the report Sarah-Jane Clifton.

For more go to BusinessGreen