A Critical Conversation on Climate Change ... - Green Choices

188 development dialogue september 2006 – carbon tradingbusiness-as-usual forest management’, ‘temporary carbon sinks’ andbogus emission ‘reductions arising from a “fortunate” choice of baseyear.’ 439 Carbon trading hasn’t made the bullet of emissions reductionsmuch easier to bite than it was to begin with.Each Kyoto signatory knows, moreover, that both it and its fellowsignatories have strong short-term economic incentives to look theother way when firms exceed their emissions targets. That makesdefault even more tempting. 440 Many observers have doubts whetherKyoto-like agreements can survive after 2012 anyway.As pollution trading expert Ruth Greenspan Bell observes, it is‘highly unlikely that anything approximating the rigour of the US[sulphur dioxide] trading system can be devised to control climatechange worldwide’ in the future even if measurement of emissionswere possible, since countries tend to see international oversight asa ‘threat to their sovereignty’. 441 They are likely to withdraw from atreaty whose conditions are too onerous, or simply accept the penaltiesimposed by a lax agreement.Not that the US itself is exactly a model for ‘rigour’ in this respect.No. As economist William D. Nordhaus notes, ‘the accounting scandalsof the last decade have not been limited to dollar scandals,’ but‘have also spilled over into emissions markets.’ 442 Greenspan Bell herselfhas documented the case of PSEG Fossil LLC, the biggest playerin New Jersey’s emissions trading system, which apparently had notinstalled necessary pollution controls or obtained proper permits:The US Justice Department discovered this and brought an enforcementaction, which was resolved in the form of a consent decree.PSEG, without admitting any wrongdoing, agreed to stopselling its credits to other firms and to stay out of the trading system.When PSEG was forced to withdraw, its sheer size and statusas one of the largest “suppliers” of credits in New Jersey broughtthat state’s system close to collapse. 443It makes you wonder what kind of fraud lies ahead for the world carbon market.Yes. ‘Such cheating,’ Nordhaus concludes, ‘will probably be pandemicin an emissions trading system that involves large sums of money.’ Heobserves that whereas in a tax system, the government has an incentiveto try to ensure taxes are paid, in an emissions trading system, bothbuyers and sellers can afford to be indifferent to whether reductionshave actually been made. Tax evasion in the US is on the order of 10 or20 percent of taxes due. Given the incentives and the lack of adequatemeans of quantification, it is hard to put an upper limit on the extent