Climate change - A greenhouse for capitalist profit

Jul/Aug 2007

Climate change is certainly the most popular issue among British politicians these days - far more than, say, unemployment, housing, social injustice or poverty.

Nor is this phenomenon specifically British. Every one among the world's political leaders is busy trying to develop some sort of climatological profile. And every international summit now includes a grandiose verse on the need for a proactive policy on global warming and climate change.

In this respect, probably the most farcical among this year's ceremonies took place in January this year, at Davos, Switzerland, at the annual World Economic Forum. The high-powered participants, whose number included 24 heads of state, 85 cabinet ministers and the chief executives of 800 companies, were falling over one another to proclaim their commitment to tackling climate change - which was one of the conference's most prominent themes. To stress the event's impeccably green credentials, parcel giant DHL had even organised carbon-neutral delivery services, while Coca-Cola offered 18 hydrofluorocarbon-free coolers, so that delegates could take refreshments without having to worry about the harm caused to the ozone layer, let alone their consciences.

Foremost among these self-styled defenders of the planet was Blair, of course, who has even indicated that he may be considering a career change in this field when he leaves office. In his closing speech to the conference, Blair invited delegates to "... imagine [that] over the coming months the world agrees and over the coming years, it acts. Think how attractive our story of the world's progress would be. Then think of failure and who will weep and who will rejoice. Think of all of this. Then let us agree. Then let us act."

The fact that such sanctimonious hot air was spouted by someone who has been directly responsible for bombing populations into the ground and reducing their environment to rubble in Iraq and Afghanistan over the past four years, did not disturb the pure atmosphere of Davos one bit!

But then, of course, all this preaching costs nothing to the governments concerned, as long as it remains in the realm of words and not action, as has been the case so far. However, it has some advantages. While it allows politicians to court environmental concern among their domestic electorates, it paves the way for more public funds to be diverted for dubious use, under some commendable environmental pretext. Indeed, away from the grand speeches, one of the Davos sessions, aptly entitled "Make Green Pay", was devoted to debating "what will motivate the global marketplace and if we can make green pay - for the investor, for business and for the planet".

In short, not only was this mostly hot air for the benefit of the general public, but it was a warming up exercise to boost capitalist profits in the name of fighting "global warming"!

Behind the show business

This extravagant window-dressing, however, is only designed to conceal the real issue - the absence of any real action aimed at controlling climate change and the threats it implies for society, even though both are established scientific facts.

The extent to which climate change should be blamed on human activity alone (rather than being considered, partly at least, as one aspect of the planet's own "built-in" processes) remains a subject of debate among scientists. But from a social point of view, this debate is largely irrelevant: the fact is that society shapes itself by acting upon nature and, in so doing, it transforms nature. There is no way out of this interaction.

The real question which is being posed - and was posed already over a century ago by people like Engels, among others - is how consciously and rationally society manages its impact on nature. And for all of today's window dressing, the long and short answer to this question is - not at all.

The grandiose statements issued at Davos and other "world summits" can only try to paper over the glaring irresponsibility of capitalism as a form of social organisation.

Because, of course, these issues bring capitalism, with its economic organisation based on individual greed and its criminal disregard for the interests of society as a whole, straight into the dock. After all, the capitalist plundering of the world's resources started damaging the planet's natural mechanisms long before anyone talked about "climate change" or "global warming"!

In Africa and other parts of the Third World, huge areas of previously fertile land were rendered infertile by the growing of cash crops, for no reason other than to line the coffers of western companies. Across the planet, whole regions were turned into uninhabitable wastelands by the efforts of the rich countries' mining barons and oil majors to bleed as much profit as possible out of their natural resources. In fact, the rich countries themselves were not even spared with, for instance, so many East London working class estates built on industrial dumps which were known to contain toxic material. The list of environmental damage caused by capitalist profit is endless.

Of course, by and large, none of this damage affected directly the living conditions of the better-off layers of society, so that nothing was done about it and the criminal recklessness of capitalism with regard to nature and the environment was allowed to carry on with very few restrictions up to today.

Climate change, however, has proved to be somewhat different in that it affects more or less everyone, rich and poor. And even if the poor stand to be, once again, the main victims - as the 2005 events in New Orleans showed - tornadoes are not in the habit of stopping at the gates of the wealthy's luxurious paradises nor do tsunamis spare the holiday resorts of the western middle classes. As a result, climate change has become enough of an issue among their own social base for the governments of the rich countries to make a point of claiming that they are determined to deal with it.

Predictably, of course, these governments have no intention of placing the blame where it belongs - the capitalist class they represent. It is now commonly accepted that the main emissions dissipated by industrial facilities into the atmosphere (the so-called "greenhouse gases") are major contributors to global warming. But despite Blair's grandiose sermons at Davos and elsewhere, we still have to hear a British minister exposing the irresponsibility of big business, which maximises its profits by cutting production costs as much as possible regardless of the consequences for the environment and safety!

Instead, ministers have the nerve to point the finger at ordinary people, lecturing us about leaving TV sets on standby or switching off the light behind us - and, in the end, making us pay, through rocketing energy costs and punitive taxes on fuel and road use.

When it comes to industrial emissions, however, this moralistic tone disappears - to be replaced with grandiose rhetoric about the "international effort" that needs to be made and the vital role that governments have to play (funded by public money, of course) in order to entice private profiteers into joining the anti-"global warming" crusade.

Market chaos as the jack-of-all-trade

The 1997 Kyoto protocol was supposed to be the foundation stone on which this "international effort" is to be built.

However, the signatories to this Kyoto protocol did not demonstrate any urge to actually do something. Rather, all it showed was that there was a degree of consensus between governments on climate change: they merely wished to give the illusion that something was being done, while using the opportunity to help their national capitalists make a killing out of this new "green" business.

For the likes of Blair and Clinton, Kyoto was certainly intended to be a useful vote-winner as well. But behind the scenes of the protracted negotiations there was nothing but good old horse trading, with the major powers ensuring they would get the largest slice, as usual, of what was expected to be a very substantial cake.

This wrangling meant that it took a further eight years for the protocol to come into force, in February 2005. In the meantime, the Bush administration had decided to cancel the US's Kyoto commitments, reducing the protocol to very little, since the US was, and probably still is, the world's biggest polluter. So even if it really had been meant to do something about global warming, which it was not, it would hardly justify all the fuss.

The protocol was finally ratified by 169 countries and other government entities, between them responsible for just over 61% of the world's greenhouse gas emissions. These countries had agreed, on paper at least, to cut their emissions of carbon dioxide and five other greenhouse gases, with an average objective of 5.2% below 1990 levels to be reached over the period 2008-2012. However, a majority among them had only agreed to non-binding targets or to no target at all. Out of the total, just 38 industrialised countries had agreed to a legally binding objective. And even then, objectives were mitigated by introducing spurious pretexts to cut targets. For instance countries could avoid some of their emissions-reduction obligations by increasing forests (and Russia and Japan in particular were given generous allowances on their obligations just because of the forests they already had, as a bribe to persuade them to ratify the treaty).

Not only were the objectives of Kyoto unimpressive, but they were also difficult to enforce - if only due to the difficulties involved in producing a precise measure of the greenhouse gases released by any given country. This made for a pretty limited deal!

Yet, despite these limitations, the protocol includes, in addition, numerous get-out clauses.

The most cynical of these clauses involves allowing countries or companies, which cannot, or have no plan to, meet their emission targets, to buy "emissions permits" from others - meaning that polluting is acceptable, but only for those who can afford it. Potentially this means the development of a market (in fact, several markets) whose only purpose is to trade pieces of paper representing somebody's "right" to dump a certain amount of greenhouse gases into the atmosphere - thereby making a farce of all the "objectives" and "targets" which are, supposedly, the main justification for the Kyoto protocol in the first place!

This "market" is further extended by a system of "offset credits" awarded to UN-approved "emission reduction projects" - i.e. projects which can be demonstrated to have reduced emissions, compared to normal prevailing conditions, where they are set up. Such projects are often owned by western companies while being located in low-income countries where gas emission levels are normally high. Their western owners can then use the "offset credits" they receive from the UN to meet some of their emission reduction targets in the facilities they own in the rich countries - at a lower cost.

As the World Bank puts it, with all the cynicism that can be expected from it - "the Kyoto Mechanisms have created an architecture and framework for the market-based management of the global atmosphere". Well, this is exactly the problem, put in a nutshell! Yes, though the capitalist market has already proved itself by creating today's environmental crisis, for the politicians the key to averting climatological catastrophe is - the market!

Polluting markets

That governments should pull the "market forces" con-trick out of their sleeves, as the best way to tackle global warming, may seem crazy. But isn't that what they do for just about every problem, no matter how vital for society?

Officially, we are told that this is for the sake of efficiency. But for the politicians who resort to such policies, the main advantage is to avoid antagonising a section of the capitalist class, by giving them a chance to make some profits out of an artificial market, instead of getting their backs up with some new legislation they would inevitably dislike. The "market forces" trick is just another way of bribing reluctant capitalists into agreeing to some change, using some form of publicly-funded "incentive".

In fact this trick had been used in the US, long before Kyoto, to reduce the lead content in petrol - as limits were reduced by the government, refiners were allowed to continue exceeding them, as long as they had purchased sufficient lead credits.

Then, in 1990, the amendments to the American Clean Air Act introduced regulation of sulphur dioxide emissions for power plants, by setting up a system of sulphur dioxide (SO2) emission allowances which could be traded privately or at an annual auction, run by the Chicago Board of Trade - a system dubbed "cap-and-trade". The idea was that some plants, usually the more modern ones owned by richer companies, would have surplus allowances, which they could sell. For older, dirtier plants, buying up allowances was a cheap way of being able to continue to pollute at a higher level than would be allowed otherwise. Gradual reduction of the allowances would both reduce overall SO2 emission levels and keep the price of allowances up.

This SO2 market has now reached a value of £2 billion a year. Even without state incentives for "green" investment the simple fact that companies are "given" something to sell by the governments, namely artificial emission allowances, gives them a chance to make additional profits, regardless of whether or not it has an effect on pollution.

Hence, the resounding welcome given to these "market-driven incentives" by big business and financial speculators - so much so, that the concept was extended to trading in other emissions and markets in these emissions have sprouted.

In the case of greenhouse gases, although Kyoto outlined the basis of a market-driven framework for emission trading, a number of separate physical markets sprang out of it.

Being the biggest source of greenhouse gases and speculative capital, the US should have been the ideal location for such a market. However, following Bush's decision to cancel the US's Kyoto commitments, the idea of an all-US carbon emission trading scheme was abandoned. Instead, some more limited schemes have been set up. The Chicago Climate Exchange (CCX) has been trading since 2003 and brings together more that 120 companies (including Ford, Motorola, Rolls-Royce, IBM and half-a-dozen power companies), plus some public institutions, which have voluntarily committed themselves to a regular annual emission reduction and which trade emissions allowances among themselves. A similar scheme has been announced, which would involve California and another 4 US states.

In contrast with the US's regional markets, European Union governments took the emission trading idea a stage further. The EU's Emissions Trading System (ETS) has been running since the start of 2005 and currently trades in allocations for 12,000 companies across the member countries. It is the biggest emissions market and the only multinational one. It grew exponentially - trading on this market was about half a billion pounds in the first quarter of 2006. In April 2006, though, there was a price crash - a tonne of carbon dropped in price from about £20 to less than £7. The price fell even further down recently and is currently less than £1, leading to calls for governments to be less generous in the next round of allowance allocations. Despite this, the World Bank is ecstatic in its assessment of global carbon-trading. It estimates that the overall value of the world's carbon markets exceeded £5 billion in 2005, and in 2006, was on course to be three times this amount. Even the volatility of prices did not dim the enthusiasm of the financiers - after all, some speculators will always make a killing.

A win-win situation... for capital

Not only does this market "solution" open up new areas for speculation, with the myriad of new financial companies, consultants, etc, this supports, but it also rewards those companies most responsible for pollution in the first place, by handing them saleable emissions allowances for nothing. Under the ETS, for instance, national governments are responsible for annually handing out the emissions allocations to companies (which then have to be approved by the European Commission). The UK government alone hands out annual emissions allowances worth £2.7 billion to around 1,000 companies which produce about 46% of the country's greenhouse gas emissions.

Since the initial allocations are based on past emissions levels, the worst polluters are rewarded with the highest allowances. For the businesses that pull the politicians' strings, the game is to secure for themselves the highest level of allowances possible, either by misrepresenting their existing level of emissions (Germany wanted to take back allowances from some companies which were found to have lied about their past emission levels, but the EU Commission prevented them from doing so, saying it was against the rules of the scheme!) or by "lobbying" their governments.

Of course, politicians are only too willing to cave in to such lobbying. In the case of the UK, the power companies were unhappy with their initial allocations, so the government backed down and awarded them much more generous polluting allowances - with the result that the UK's big six electricity generators have been able to make windfall profits of around £600 million per year by selling surplus allowances on the ETS.

BP, Esso and Shell have also made millions out of selling surplus ETS allowances, whereas NHS hospitals have been obliged to spend tens of thousands of pounds purchasing extra allowances. And the winners in the ETS casino are not compelled to invest a single penny of these profits in anything that might genuinely reduce emissions.

According to the delighted capitalists, this is a win-win situation, since it supposedly pays off in environmental terms too. But here the situation is not quite as rosy. The record of these "efficient" markets in actually reducing emissions, is not nearly as wonderful as their profit-generating powers.

Using a trading scheme, it took the US 23 years to finally eliminate lead from petrol - something that Japan managed in 10 years and China in 3, using plain old state regulation. The American sulphur dioxide market is expected to reduce emissions by 35% from their 1990 level by 2010 - but Germany managed to reduce its SO2 emissions by 90% between 1982 and 1998, without resorting to a market.

The problem is that, given the choice, companies will always go for the cheapest short-term option, rather than the most effective long term one, from the point of view of society as a whole. And for governments, handing the problem over for "market forces" to sort out, is a way of washing their hands of their responsibility and avoiding legislation which would force the polluters to bear the costs of cleaning up their acts.

The "offset" farce

The "offset credits" introduced by Kyoto are among the big attractions of the carbon emission market for speculators, as well as among its biggest scandals.

The major source of these credits is the Third World, via projects which supposedly "offset" emissions in the industrialised world. Projects have to be approved by the UN to qualify for credits - but, bizarrely, all they have to do to qualify is to prove that the project in question produces less emissions than "business as usual".

The projects which can qualify are many and varied. Some fall into the category of "carbon sinks" - planting new trees, carbon saving or sequestering schemes, seeding stretches of ocean with iron filings to foster plankton growth, etc. Others are categorised as "emissions saving", e.g. hydrodam-building, wind farms, biofuel plantations, using waste methane to generate electricity - even feeding supplements to cows to reduce methane flatulence! The problem, in principle, with all of them is that most are not readily quantifiable and, even if they were, it is just not possible to equate a reduction in cows' emissions with the emissions of an aluminium-smelting plant - but for the purposes of making profits, this fiction is maintained.

Many companies have sprung up around the offsetting idea, whose primary function is to relieve the gullible of their cash. These companies essentially act as middlemen, buying "carbon rights" from, eg, forestry firms and selling them on at a highly inflated price.

The Carbon Neutral Company is one such company in the UK, promoted by the All-Parliamentary Climate Change Group, comprising 100 MPs from all three major parties. CNC 's website allows you to work out your carbon footprint and then, once you have discovered what a burden you are to the planet, they will tell you how big a cheque you have to send them to make amends!

Another such company, Climate Care, had a project where it distributed energy efficient light bulbs for 10 days in Cape Town. It was a one-off - the company did not even bother to replace the bulbs which got broken straight away - and was as utterly useless to the impoverished population of the area where this was carried out as it was in terms of emissions reduction, since the recipients could not afford to replace the bulbs, which are more than 5 times as expensive as conventional ones. But it fulfilled the requirements for carbon credits admirably - not required by legislation, not common practice and not financially viable without carbon funding.

Two of Climate Care's prominent clients are British Airways and British Gas. They, at least, get something useful from this - a green gloss, to cover up their highly polluting businesses.

Some schemes promoted by offset companies are however, actually harmful to the population.

For instance biofuel plantations and swathes of "carbon trees" can have the effect of undercutting people's livelihoods, since they take up land which would otherwise be used for subsistence and are often brutally policed against the claims of the locals. There are also examples of projects which use the methane produced by festering rubbish dumps to generate electricity, which gets credits for being cleaner than generating with coal, but which also serves to keep open dumps which local people have campaigned to have closed down altogether.

And often the highest credits are awarded for making relatively small changes to industrial plants, which are still big polluters. For instance, in India, which has 82% of such projects, Channel 4 recently highlighted the case of sponge iron producers. Their factories get UN credits for removing hydrofluorocarbons from their emissions - but the air around the plants is so thick with pollution that people cover their noses and mouths with handkerchiefs to go past and the plants also poison the surrounding land and water. The firm in Channel 4's report had actually been prosecuted by the local state administration for breaking local anti-pollution laws.

These are just a few examples, but they illustrate how the mechanism is in no way designed to improve the standard of living of people in under-developed countries, by using the latest technology to do this in the least environmentally costly way. Rather they are designed to allow companies to profiteer from Third World populations in yet another way, and allow First World companies to continue to produce as cheaply as possible and avoid forking out for expensive new equipment to reduce their emissions.

Alternative sources of profit

The British government has been one of the most eager to embrace carbon-trading. But, lucrative though it is, carbon-trading is not the only gift that the government has handed to business, under the guise of combatting global warming. There are also "green" subsidies to be had in the field of alternative energy.

The government's policy relies heavily on wind power, which means big contracts for the companies which construct the giant wind farms, plus all the infrastructure around them, for a start. But even if the countryside was covered completely with huge rotating turbines, it would not be enough. So, recently, politicians have been making the case for nuclear energy as an indispensable part of the effort to reduce carbon emissions.

The environmental argument for nuclear power (in its present form), just because it does not generate greenhouse gases, is a bit hard to swallow, given the unresolved safety issues involved - but it certainly is an indispensable part of making nuclear energy profitable, while the state picks up the huge bill for decommissioning old nuclear power plants.

If the big oil companies have been involved in alternative energy for a long time now, it is not just for the sake of image. It is still several times more expensive to generate electricity from renewables than from fossil fuels. But driving up oil prices - as the oil companies have been doing, quite deliberately, since the '70s - makes it a potentially profitable option.

In addition, what makes alternative energy more viable is that an artificial market for renewable energy has been created in the UK, with legislation which obliges the big electricity distributors to buy a percentage (which increases annually) of their supply from renewable sources, or pay compensation. The cost of this, of course, is passed straight to the consumer. And despite some distributors offering customers the chance to "choose" to buy "green" electricity, in fact everyone pays for it, whether they like it or not.

So it is not surprising, then, that Shell, for instance, is one of the largest wind power developers in the world. It has interests in American and European wind farms, including one of the largest in the North Sea, off the Dutch coast, and is also involved in plans for an even bigger off-shore wind farm, off the south coast of Britain.

BP, which as long ago as 1997 changed its logo to a green and yellow flower shape and advertised itself with the slogan "Beyond Petroleum", also has interests in wind power and is the world's largest producer of solar power. Despite this green image-building, though, far from being "globally responsible", BP is not even locally responsible - the investigation into the explosion at its Texas City refinery, in which 15 people were killed and hundreds injured in March 2005, blamed the company's blatant violation of safety rules, concluding that "BP appears to have had a corporate blind spot relating to process safety".

BP has another strand to its emissions-reduction interests, in "carbon capture and storage" - where CO2 is removed from the atmosphere at the point where it is produced in large quantities, e.g. by power stations, and pumped underground, sometimes under the seabed. The idea is that it will be stored there indefinitely, though there are question-marks over that. One of their schemes, in partnership with Scottish and Southern Energy, aims to bury the carbon dioxide produced by the Peterhead power plant in Scotland in its depleted Miller oil field in the North Sea. Despite the fact that this technique may allow them to recover more oil from almost-exhausted fields, BP is quite up-front about the fact that it will only be pursued if it can profit from the carbon credits it gets as a "reward" - otherwise, the state is expected to pay. According to a spokesman, "There has to be a value put on it to make the project economic and for us to take part in the project....It has to be for a government to decide whether that's something that it wants to put its money into".

And BP has good reason to think that indeed, its blackmail will work. After all, Labour governments have such a long record of bending over backwards to avoid upsetting big business! And this applies just as much when it comes to climate change, as was shown by the way in which Labour managed to turn its own Climate Change Levy from a tax on business into a subsidy to business!

Businesses (apart from very small ones) pay a tax called the Climate Change Levy on all the fuel they use (ranging from 5p to 43p per kilowatt hour, depending on the fuel), unless it is from renewable sources. However, when Labour introduced this tax, they were so embarrassed to be seen "taxing business" that employers were given a 0.3% reduction in National Insurance payments to compensate - meaning the Levy was partly subsidised from the welfare system! In fact, this cut more than compensated the bosses, as the government itself admits. Besides, companies can be exempted from 80% of the Levy anyway, by signing a Climate Change Agreement, which commits them to reducing their emissions by a certain (small) percentage every year. And as if that wasn't enough, they can set off against tax, 100% of the cost of any investment for the purpose of increasing their energy efficiency.

Capitalism costs the earth

Of course, someone has to pay, one way or another, for all these profits made under the cover of fighting global warming, whether it is in the form of carbon and other emission trading or government subsidies. And who will that be, if not the vast majority of the population and, in particular, the working class?

At every turn, through higher gas and electricity bills, taxation, congestion and road charging or maybe, in future, being fined for not recycling, working people can expect to be squeezed in the name of "saving the planet". And to justify all this, there will be all the doom-mongering, which blames individuals for global warming, preaching that people must change their lifestyles - switch off lights, do not go on holiday, recycle, etc. - to avoid environmental catastrophe.

The idea that people will have to make sacrifices and consumption will have to be drastically reduced does not stop with the population of the rich countries. According to this line of argument, people in the Third World cannot ever be allowed to enjoy the material comforts that Western populations take for granted today.

Even the old idea that the population is simply too large and growing too fast, has resurfaced - a notion that goes back to the early days of the industrial revolution, when the reaction of horrified members of the upper classes to the over-flowing urban slums was to conclude that there were just too many people (meaning too many poor people, of course), at a time when the population of Britain was only one-sixth of what it is now.

Today, the old arguments are rehashed to say that the planet's resources cannot cope with the rising global population. This hardly explains why people in the poor countries lack the most basic necessities right now, when there is certainly no shortage of those necessities worldwide. Nor does it take account of how poverty itself contributes to the growth in population - it is far easier just to blame the poor for breeding too fast. Of course, all this moralising is done from the comfort of the well-off Western world, by people who cannot even imagine the situation of Third World populations.

Trying to reduce manmade greenhouse gas emissions, as a matter of urgency, is probably a necessary precaution. But this is not something that can be achieved on the basis of doom-mongering and moralising. Nor will it be achieved as long as the capitalist organisation of society remains intact.

Behind the green mask is the same capitalist system, and the parasites whose reckless exploitation of the world's resources has played an important part in bringing the planet to the catastrophic state in which it is today. Their thirst for profits knows no bounds - not even when it may endanger the entire planet. This is where the menace to society really lies.