by Patrick Bond
Business Day, 31 December 2010

The Cancun Agreements’ fatal flaw is simple: faith in fickle markets. A year from now in Durban, the apparently unifying strategy of combining ever-broader emissions trading with a modicum of North-South aid to resolve contradictions between national blocs will again become a destructive wedge.

As world negotiators stared into the abyss of failure, markets became a lifeline. The World Bank was everywhere in Cancun, applying neoliberal economic theory where it’s rarely gone before: into new Chinese emissions markets, lurking within tropical forests, burrowing into the topsoils of agricultural land, and even tackling large ‘charismatic’ endangered species. All are sites for extended corporate investments and offsets against planet-threatening emissions.

The idea is lowering business costs of transitioning to a post-carbon world. After a cap is placed on total emissions, high-polluting corporations can buy ever more costly carbon permits from those which don’t need so many, or which are willing to part with them for a higher price than the profits they make in production or energy-generating or transport activities.

However, a global civil society network – the Durban Group for Climate Justice – formed in 2004 as a critical mass opposed to ‘the privatization of the air’. We worried that the main test case, the EU’s Emissions Trading Scheme, not only failed to reduce net greenhouse gases there, but suffered extreme volatility (five major crashes from 2006-10), an inadequate price of €15/tonne (down from a high of €30/tonne 30 months ago and far less than is required for post-carbon transition investments), and worsening fraud scandals.

The market fix is also being tried in the Third World through Clean Development Mechanism (CDM) projects, whereby investment strategies to prevent ‘additional’ pollution also qualified for carbon credits, reaching around 6 percent of total trading at peak in 2008. But illustrating the pitfalls, Sasol argued that its Mozambique gas pipelines, far less damaging than burning Mpumalanga coal, were ‘additional’ because they wouldn’t have been built without CDM incentives. The specious claim was rejected by UN authorities after a 2009 complaint by Earthlife Africa.

With Europe as the base, world emissions trade grew to more than $130 billion in 2008 and while flat since then due to economic meltdown, corruption investigations and then Copenhagen-induced despondency, the market is projected to expand to $3 trillion/year by 2020 if the US signs on. Last month, a new estimate of up to $50 billion in North-South market-related transfers and offsets each year emerged from a United Nations financing commission which included SA planning minister Trevor Manuel. World climate managers evidently hope to skimp on grants and instead beg business to push vast monies into CDMs instead.

Durban is an important guinea pig, for at SA’s lead CDM pilot, the Bisasar Road landfill, methane from rotting rubbish is converted to electricity. After helping set it up, the World Bank refused to take part in marketing or purchasing Bisasar Road emissions credits. Local activists say the reason was growing awareness of Durban’s notorious environmental racism.

In early 2005, just as the Kyoto Protocol came into force, a Washington Post front-page story revealed how community organizer Sajida Khan suffered cancer from Bisasar Road’s toxic legacy. Back in 1980, the landfill – Africa’s largest – was plopped in the middle of Durban’s Clare Estate suburb, across the road from Khan’s house, thanks to apartheid insensitivity.

Instead of honoring African National Congress politicians’ promises to close the dump in 1994, the municipality kept it open when R100 million in emissions financing was dangled. After Khan died of cancer in mid-2007, civic pressure subsided and Durban began raising €14/tonne for the project from private investors.

Similar controversy surrounds the Reduced Emissions from Deforestation and forest Degradation (REDD) programme. In theory, REDD sells investors forest protection. But it’s seen as a boon to voracious commercial forestry and a danger to indigenous peoples, given that proper safeguards were not adopted in Cancun.

And everyone from EU climate commissioner Connie Hedegaard (a Danish conservative who hosted the summit last year) to Greenpeace warns that REDD could wreck fragile carbon markets, not only due to socio-ecological forest controversies but because a fresh glut of credits would again crash the price.

Financial gaming also remains rife in the EU, and on Wednesday, even the ordinarily pro-trading World Wild Fund for Nature and Öko-Institut attacked steel producers ThyssenKrupp and Salzgitter as fraudulent carbon profiteers, demanding that “the EU put a halt to the use of fake offsets.”

In short, last week’s market mania was a dangerous diversion from a daunting reality: the US, China, South Africa and most other big emitters came to Cancun to avoid making the binding commitments required to limit the planet’s 2000’s temperature rise, ideally below the 1.5°C that scientists insist upon. Naturally the (binding) Kyoto Protocol is a threat to the main emitting countries, which want to replace it with the voluntary, loophole-ridden Copenhagen Accord.

And naturally, the North’s failure to account for its vast ‘climate debt’ continued. Pakistan suffered $50 billion in climate-related flood damage alone this year, yet the total on offer from the North to the whole world is just $30 billion for 2010-12.

And even that’s funny money, according to Hedegaard. When last February she complained (according to WikiLeaks) that Tokyo and London were trying to pay their share partly in the form of loan guarantees, not grants, US State Department deputy climate negotiator Jonathan Pershing registered his approval: “Donors have to balance the political need to provide real financing with the practical constraints of tight budgets.”

The Copenhagen Accord, signed by Jacob Zuma, Barack Obama, Wen Jiabao, Lula Ignacio de Silva and Manmohan Singh, is already compromised by bribery. The Maldives and Ethiopia – once leaders in the G77 and Africa – soon dropped their resistance to that shoddy deal in exchange for payola, WikiLeaks revealed.

After Hedegaard told Pershing that the Alliance of Small Island States “‘could be our best allies’, given their need for financing,” he quickly provided a $50 million aid package to the Maldives. The sinking island’s US ambassador, Abdul Ghafoor Mohamed, told Pershing on February 23 that if ‘tangible assistance’ were given his country, then other affected countries would realise “the advantages to be gained by compliance” with Washington’s climate agenda.

Whether or not a comprehensive Durban deal replaces Kyoto, the ongoing climate market failures and worsening corruption are distracting the world from the more serious work required to go post-carbon: state ‘command and control’. To save the ozone hole from growing, an outright ban was required against CFC emissions, and after the Montreal Protocol did so starting in 1996, there’s our model for serious mitigation action.

Given South Africa’s own extreme carbon addiction and the lamentable role Pretoria climate negotiators play, self-interestedly slowing progress, Cancun’s desperate turn to the market will backfire loudly next year. In Durban, an uncivil society starved for a decent mix of climate change mitigation and the rerouting of cheap electricity from guzzling metals smelters to the powerless masses will be especially noisy.