Of all the schemes under discussion to stop or limit catastrophic climate
change, one of those getting most attention is pollution trading. This
popular but little-tried idea lies at the heart of some of the most
prominent international approaches to the problem, including the Kyoto
protocol and the European Union's Emissions Trading Scheme (EUETS). The
trouble is, it won't work.

Pollution trading was developed in the US in the 1980s and 1990s to make
reducing emissions cheaper and more palatable for heavy polluters. The idea
is that if business A can reduce emissions more cheaply than business B,
then B can pay A to make reductions for both of them. Moreover, by putting a
price on emitting greenhouse gases, trading is meant to encourage businesses
to invent new technologies to replace fossil fuel use.

This approach is misguided. Arguably, the US sulphur dioxide trading
programme of the 1990s helped businesses save money in meeting modest
short-term reduction targets for a single substance. But global warming
requires a more radical solution: nothing less than a reorganisation of
society and technology that will leave most remaining fossil fuels safely
underground. Carbon trading can't do this. It just encourages the industries
most addicted to coal, oil and gas to carry on much as before. Why bother
making expensive long-term structural changes if you can meet your targets
by buying pollution rights from operations that can cut their carbon
cheaply?

What's more, carbon trading schemes have tended to reward the heaviest
polluters. Heavily polluting industries and nations are being granted
roughly as many free pollution rights - which they can trade lucratively -
as they need to cover current emissions. Under the EUETS, some of the worst
greenhouse offenders, such as the German utilities group RWE, have earned
hundreds of millions of euros in windfall profits just for pursuing business
as usual. Meanwhile ordinary citizens suffer higher electricity prices, and
renewable energy developers must beg for funds.

The EUETS and the Kyoto protocol are further weakened by loopholes that
allow big polluters to buy cheap "offset" credits from abroad. A British
cement firm or oil company lacking enough EU permits to cover its emissions
can make up the shortfall simply by buying credits from, say, a wind farm in
India, a scheme to destroy HFC refrigerants in Korea, an energy efficiency
programme in South Africa or a project to burn landfill gas to generate
electricity in Brazil.

Such projects are merely supplementing fossil fuel use; they are not
replacing it. The institutions most eager to set up offset projects - from
the World Bank to Tokyo Power - are precisely those most committed to
burning up more and more fossil fuel. Covering the land with windmills and
biofuel plantations will be of little use unless fossil fuel extraction is
stopped.

The damaging effects of carbon trading schemes are felt severely in poor
countries. The Durban Group for Climate Justice has documented that almost
all the carbon credits are generated by polluting companies, while
communities that follow climate-friendly practices such as preserving local
forests or defending their lands against oil exploitation are ignored. Only
big firms can afford to hire carbon accountants, liaise with officials and
pay the costs of getting projects registered with the UN. Yet these are
often the companies that local people battle hardest against in defence of
their livelihoods and health.

The US wrote carbon trading into the Kyoto protocol before abandoning the
treaty to its fate. The sclerotic market apparatus that resulted does not
serve anyone's best interests. It helps keep an oppressive, fossil-centred
industrial model going at a time when society should be abandoning it.

There are better ways of tackling climate change than by privatising the
Earth's carbon-cycling capacity. Public investment, shifting subsidies away
from fossil fuels and toward renewables, conventional regulation, support
for the work of communities already following or pioneering low-carbon ways
of life, requiring that businesses pay the costs their competitors incur in
developing green technologies - all these are stronger and more direct ways
of bringing about the structural change required.

Historians of science tell how scientists who supported the old European
astronomical model that placed the Earth at the centre of the universe had
to add more and more elaborate, ad hoc refinements or "epicycles" to their
calculations in order to account for planetary movements. Carbon trading is
like one of those epicycles. It's time it was replaced.

LARRY LOHMANN works for the UK-based NGO The Corner House (www.the
cornerhouse.org.uk). He is editor of "Carbon Trading: A critical
conversation on climate change, privatisation and power", published last
month by the Dag Hammarskjold Foundation, the Durban Group for Climate
Justice and the Corner House)