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USC Talk (13 March 2009) at USC-PERE

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USC Talk (13 March 2009) at USC-PERE Powered By Docstoc
					Financial Haruspicy, Eco-Market Mandarins & Resistance on the Road to Copenhagen & Beyond
M. K. Dorsey - Dartmouth College (Resident Scholar, Center for Cultural Studies UC Santa Cruz) USC - Los Angeles March 2009

A Note on Haruspicy…

Overheard in Poznan:

“… figuring out the carbon price in this postcrash mess is like financial haruspicy…”
Haruspicy: the inspection of the entrails of sacrificed animals [financial analysts, Madoff?], especially the livers of sacrificed sheep and poultry… to make forecasts on human health and the future in general. …The rites were paralleled by other rites of divination such as the interpretation of lightning strikes, of the flight of birds (augury), and of other natural omens… gut divination.

On the road to Copenhagen… Two Axes

Axis 1:

The First Axis
• • • • • • Big fossil fuel-using companies Governments that want to delay Banks, hedge funds, traders Consultancies (CDM verifiers, etc.) Corporate “bad citizens” in Southern countries Hegemonic science and scientists

The Second Axis: Resistance
• • People fighting fossil fuel developments People struggling against companies benefiting from the Clean Development Mechanism (CDM), other offsets Local knowledge of low-carbon technologies & social organization Renewable energy movements Energy democracy & sovereignty Emerging, global climate justice movement

•
• • •

TIME
(a third axis?)
A late November 2008 meta-data report by the Public Interest Research Centre (PIRC) says:

“…critical climate [collapse]
processes might have begun … almost a century ahead of schedule…”
--Public Interest Research Centre. Climate Safety. 25 November 2008.

MARKET HEGEMONY

“The EU should aim to build a robust OECD-wide carbon market by promoting the establishment of national emission trading systems in all OECD countries by 2013 and the linking of comparable systems by 2015.”
--EC Copenhagen Communication, “Towards a comprehensive climate change agreement in Copenhagen”, 28 January 2009

“Carbon trading may have been the
answer once but not any more... It will just take too long to achieve anything, and we no longer have the luxury of time.

”

--Professor Kevin Anderson, Director of the UK‟s Tyndall Centre for Climate Change Research, Discussion at the Royal Society, October 2008

“We like certainty about a carbon price…[but] the carbon price has to become simple and not become a new type of sub-prime tool which will be diverted from what is its initial purpose: to encourage real investment in real low-carbon technology.” -- Vincent de Rivaz, UK Chief Executive of the French-owned gas and electricity group EDF Energy, 30 January 2009

“…hedge funds were cashing in ETS carbon credits obtained for free, causing the price of carbon to plunge. The price of carbon has slumped from £30 a tonne to below £12, leading to a tail-off in clean-technology offset projects in the developing world.” --The Guardian, 30 January 2009

“The price of carbon dioxide in the European Union has fallen so low it no longer provides an incentive to low-carbon development, and seems unlikely to do so in the near future. Permits to emit the gas, issued by the EU‟s emissions trading scheme (EUETS), have tested record lows in the past two weeks and now trade at about €11.80 ($15.12, £10.42), according to analyst Point Carbon.” --Financial Times, 2 Feb 2009

“Every time the carbon market fails to reduce emissions, the politicians and businesses who promote the market as the solution to the climate crisis reach for their Samuel Beckett: „Try again, fail again, fail better.‟”
--Oscar Reyes, researcher Carbon Trade Watch, a project of the Transnational Institute,The Guardian, 1 Feb. 2009

Emissions permits are “assets that, like other property rights, owners will fight to protect.”
---David Victor, 2000

“Firms may end up putting as much effort into rent capture as into finding efficient ways to reduce carbon usage. Investments may be delayed in the hope that high observed marginal costs would lead to more generous allowance allocations as compensation. The increased complexity of the programme… may lead some groups to seek exemptions or bonus allowances… . . . Groups will invest in lawyers, government lobbying, and public relations campaigns. This will lead to high costs and delays.”
--Peter Cramton and Suzi Kerr, 2001

“No one has any idea how to calculate [the climatic value of biotic] offsets. Nor is it likely they ever will.”
--L. Lohmann, 1999

What‟s dangerous about market myopia…

“The complete relinquishment of land and labor to the market mechanism would result in the demolition of society.”
Karl Polanyi (1944)

So where are we going?
“… figuring out the carbon price in this postcrash mess is like financial haruspicy…”
Haruspicy: the inspection of the entrails of sacrificed animals [financial analysts, Madoff?]… gut divination.

Today‟s Objective

3 Objectives Today
• Not to say “we/I told you so.” • Rather: to try to understand why there is a policy crisis over carbon trading and why it is going to continue.
– Discursive & Empirical Methods

• Understand the nature and limits of market schemes or “flexible mechanisms.” • Elaborate the nature of resistance (justice) & role of institutions in the pre- & post-2012 world.

This talk is NOT about WHAT TO DO…Maybe at the End
• Build a CLIMATE RESCUE FUND, from windfall oil profits (not new, Crude Oil Windfall Profit Tax Act of Alaska (P.L. 96223), of 1983)

• Start petroleum subsidy shifting (~15-40B/yr w/o military) • Grow Green Development Bank (Bank props up fossil fuel projects with 15-25X MORE dollars) or build out an International Renewable Energy Agency (turned on in Jan 2009). • Support shuttle diplomacy negotiations to END Oil exploration & exploitation (Swedish, Costa Rican, Ecuadorian
proposals) “Oil in the Soil” currency in DC…)

• Carbon Taxes (BC, Canada--most recent Feb. 08; and steadily gaining

Methods

METHODS

Towards an Ethnography of CO2 Markets
• Case Studies Bound By (Multi-site) Ethnographic Field Work (at COPs, with affected communities, on CDM sites, etc) • Sustained Participant Observation (since 2004, Buenos Aires
COP)

• Archival Research (pre-Kyoto warnings)
• Discourse Analysis of carbon market participants

• Semi-Structured Interviews of market-makers, Lesser participants, regulators, inter alia
• Competitive Intelligence Research…

EXPANDING L. Nader… COMPETITIVE INTELLIGENCE RESEARCH (CIR)

(1) Conduct basic literature searches on CO2 market actors; (2) Acquire public records and web-based information (e.g., monitoring and tracking actor web sites); (3) Target, seek out, & query CO2 universe: industry, NGO & government observers;

(4) Interact w/ targeted leaders (i.e., CEOs, Presidents, etc.) & data gathering from open sources (speeches, trade meetings, COP/MOP, etc.); (5) Visit sites (trading floors, COP/MOP, research institutes, plus other facilities and sites utilized by CO2 market actors; &

SAMPLE OF DATA GATHERED
Interviews -->

Electronic Correspond ence as function of Epistemic Community EPISTEMIC COMMUNITY NUMBER SINGULAR EMAILS Government Industry Institutions of higher learning/ Learned Societies Journali sts Non-governmental organizations Thesis Students 18 78 7 8 18 84

TOTAL: 62

TOTAL: 213
(from more than 3000)

<-- Correspondence

Trading & Offset 101

MEANS #1

Emissions Trading
Basic Theory

MEANS #2

Offset Trading (including CDM)
Classroom Theory

+

?

+

Offset

„Two-thirds of the supposed “emission reduction” credits being produced by the CDM from projects in developing countries are not backed by real reductions in pollution.‟
--David Victor, Stanford, 2008

“Without CDMs we'd still be profitable, but our earnings would be much lower.”
--Dr

KK Chan, Managing Director of China Light & Power (CLP) Renewables & CLP Wind Farms,

The Australian, 18 March 2008

Leading up to Poznan… “UN said it had suspended Det Norske Veritas (DNV) from verifying CDM projects after an investigation carried out in early November revealed flaws in its auditing processes and found that the individual who had signed off reports on five separate projects had not actually surveyed them.”
-- BusinessGreen.com, 1 Dec 2008

Following Poznan…

“To ensure the CDM‟s environmental integrity, the Commission proposes that the [clean development] mechanism should be reformed.”
--EC Copenhagen Communication, “Towards a comprehensive climate change agreement in Copenhagen”, 28 January 2009

What is a carbon credit?

“fungible greenhouse gas pollution right
backed by an implicit government guarantee that an optimal ‘climatically safe’ amount of total rights in circulation can be, in principle, both specified and mandated….[monitored and controlled]”
Lohmann, 2009

The Context - Markets

PRIVATIZATION OF WORLD CARBON DUMP BY THE EU

Phase 1 gift to big business (MT CO2)

2007 emissions

Phase 2 (0812) approved gift to big business

Increase/ decrease in gift to big business

Gift = x% of “world carbon dump” (IPCC)

Yearly value of gift @ €30/t

Yearly value of gift @ €0.15/t

Czech R France Germany Netherlands Poland Spain Sweden UK TOTAL EU

97.6 156.5 499 95.3 239.1 174.4 22.9 245.3 1815.7

82.5 131.3 474 80.4 203.1 182.9 19.3 242.4 1672.5

86.8 132.8 453.1 85.8 208.5 152.3 22.8 246.2 1650.7

+5% +1% -4% +7% +3% -17% +18% +2% -1%

~1-2% ~1-3% ~5-9% ~1-2% ~2-4% ~2-3% <1% ~3-5%
~

€2.6b €4.0b €13.6b €2.6b €6.3b €4.6b €0.7b €7.4b €49.52b

€13m €20m €70m €13m €31m €23m €3m €37m €248m

17-34%

CDM PIPELINE

The Theory

So on one side of the theory coin…

“Carbon trading‟s [and offsets] objective is “to reduce the costs of emissions reductions for industrialised countries.”
Ken Newcombe, World Bank Prototype Carbon Fund,
Bonn, 6 June 2000

On the other side of the theory coin…

“The complete relinquishment of land and labor to the market mechanism would result in the demolition of society.”
Karl Polanyi (1944)

The Reality…

“The price

of carbon has had virtually no effect on the market so far and virtually no effect on climate change
. . . There must be more focus on energy efficiency, more research and development and more renewable energy. The truth is that Europe has performed less well on carbon dioxide since the late 1990s than the United States -- and Europe is inside Kyoto and has an emissions trading scheme.”
Dieter Helm, energy economist, Oxford University, October 2007

“[the EU Emissions Trading Scheme] ETS has done nothing to curb emissions . . . it is a highly regressive tax falling mostly on poor people . . . Enhances the market power of generators. Have policy goals been achieved? Prices up, emissions up, profits up . . . so, not really.”
Peter Atherton, Citigroup Global Markets, January 2007

“All generation-based utilities – winners. Coal and nuclearbased generators – biggest winners. Hedge funds and energy traders – even bigger winners. Losers . . . herm . . . Consumers!”
Ibid.

PRIVATIZATION OF WORLD CARBON DUMP BY THE EU

Phase 1 gift to big business (MT CO2)

2007 emissions

Phase 2 (0812) approved gift to big business

Increase/ decrease in gift to big business

Gift = x% of “world carbon dump” (IPCC)

Yearly value of gift @ €30/t

Yearly value of gift @ €0.15/t

Czech R France Germany Netherlands Poland Spain Sweden UK TOTAL EU

97.6 156.5 499 95.3 239.1 174.4 22.9 245.3 1815.7

82.5 131.3 474 80.4 203.1 182.9 19.3 242.4 1672.5

86.8 132.8 453.1 85.8 208.5 152.3 22.8 246.2 1650.7

+5% +1% -4% +7% +3% -17% +18% +2% -1%

~1-2% ~1-3% ~5-9% ~1-2% ~2-4% ~2-3% <1% ~3-5%
~

€2.6b €4.0b €13.6b €2.6b €6.3b €4.6b €0.7b €7.4b €49.52b

€13m €20m €70m €13m €31m €23m €3m €37m €248m

17-34%

Windfall profits
for European fossil fuel-intensive corporations
____________________

WWF study commissioned by Point Carbon: (March 2008), estimated that “windfall profits” of between £23bn and £71bn (20.9bn - 64.4bn Euro) would be made under the ETS between 2008 and 2012, on the basis that the price of carbon would be between 21 Euro and 32 Euro.
____________________

“European Commissioner for Energy gives damning
verdict on EU‟s efforts to tackle climate change . . .

„A failure‟ . . .”
TV Channel 4 Evening News, London, lead story, 7 March „07

Emissions trading “would make money for some

very large corporations, but don‟t believe for a minute that this charade would do much about global warming . . . old-fashioned rent-seeking . . .
making money by gaming the regulatory process.”
Wall Street Journal, 3 March „07

Remember Ken Newcombe, a few slides ago…

Meet the new Ken Newcombe from earlier in 2008… “I'm not at all convinced from what we've seen internationally that a cap and trade regime and a price on carbon is going to motivate investment in truly transformational technologies.”
--Goldman Sachs, Former Carbon Head, Ken Newcombe, 17 Jan. 2008,
To Carbon Policy Forum in New York.

Meet the even newer still Ken Newcombe from
later in 2008…

“We are thrilled to be trading on the CCFE [Chicago Climate Futures Exchange] and supporting the pioneering efforts of the Chicago Climate Exchange.”
-- Ken

Newcombe, CEO of C-Quest Capital LLC, 19 November 2008.

Recall In the 45 days…
“Every time the carbon market fails to reduce emissions, the politicians and businesses who promote the market as the solution to the climate crisis reach for their Samuel Beckett: „Try again, fail again, fail better.‟” --Oscar Reyes, researcher Carbon Trade Watch, a project of the Transnational Institute,The Guardian, 1 Feb. 2009 “The price of carbon dioxide in the European Union has fallen so low it no longer provides an incentive to low-carbon development, and seems unlikely to do so in the near future. Permits to emit the gas, issued by the EU‟s emissions trading scheme (EUETS), have tested record lows in the past two weeks and now trade at about €11.80 ($15.12, £10.42), according to analyst Point Carbon.” --Financial Times, 2 Feb 2009

The Reality…
Eco-Market Mandarins: Private, Public, & Non-governmental

On the private side…

Cashing in on Carbon • 22nd October 2008, Jumeirah Carlton Tower, London “Unlike many other carbon-related conferences, IFR's Cashing in on Carbon event

does not really concern itself with broader climate change issues, or
with future gazing. It is aimed squarely at investment banks, investors and major compliance buyers and is focused on how they can profit today from an increasingly diverse range of carbon-related investment opportunities…. Hybrid and complex carbon credit structured products …how to identify investor demand for them in the US … derivative/synthetic carbon products…carbon linked notes…for Japanese retail investors…sub-index arbitrage strategies… productising carbon…access channels for producers, … speculators, proprietary traders and investors. …The programme Features Sindicatum Carbon Capital, NatSource Asset Management, Natixis Environnement & Infrastructures (European Carbon Fund / European Kyoto Fund), Credit Suisse, Barclays Capital, IDEACarbon, New Carbon Finance,ICF International.”

“…Hybrid and complex carbon credit structured products…”

UBS Climate Change Hedge:
“allowing businesses most affected by the uncertainty of climate change -- from ice cream salesmen to makers of winter coats -- to hedge their profits against it in a simple and transparent fashion.”--Financial Times

“…sub-index arbitrage strategies…”

UBS: “…gain simple exposure to the Weather & Carbon Emission markets on a
macro level without having to deal with the complexity of Weather Markets and the regulation intricacies of the Kyoto Protocol Mechanism.”

“…access channels for producers… speculators, proprietary traders and investors…”

A Hedge Fund World View… „Go short on CO2‟

“Although the market has accepted a certain level of inaccuracy in measurements, an even greater level of uncertainty shrouds the framework post2012.”
Hedge Fund Review, October 2007

Arbitraging & other price plays…

Consultancies . . .
(a quick peak, if we have time)

Still on the private side…
PEDRO MOURA COSTA, co-founder of Oxford-based EcoSecurities, 44, made

£4.8 million ($10 million) when he sold some shares in the
firm which helps convert emission cuts into tradable carbon credits. His remaining shares are worth about £37

million ($73 million).

Q: How did you get rich?
A: I saw the carbon market could be big business and the Kyoto Protocol confirmed my views. But I didn't expect it to take 10 years to come into force.

From the Horses Mouth…(I)
(Presentation Slides of Andy Dvoracek, from Border Energy Conference Mexico, 2006)

From the Horses Mouth…(II)

What the Horse Has Done…(III)

On the public side…

WORLD BANK
• Dec 1997- Leaked document exposes the World Bank‟s plan to charge a 5% commission on CDM carbon transactions in self-appointed role as a broker between Northern and Southern governments & industries • by March 2008 - Interviews with Bank officials reveal 13-16% commission “charge-fee”

The Lesson(s)…

What does the trading/offset market teach?
• Emissions are due to individuals. • We can exercise our social responsibility by individual consumer action.

• Fundamental change is really hard (offsets can‟t change the fundamentals of energy use; no large-scale social change has ever been achieved by consumer choice) & has no history.
• Climate action is highly technical.

What does the trading/offset market NOT teach?
• Climate change is a problem of historical power imbalances and large-scale social/technical processes and has to be tackled by political and social organising. • Even what offset companies present as „unavoidable‟ emissions are avoidable through social action.
• There are limits to using unseen Southerners to assuage middle-class individual Northern guilt. • The emerging climate movement has many encouraging precedents, not in consumer choice, but in other social movements against inequality and exploitation.

Results (tentative)

Are they really winning?
• • • • • Big fossil fuel-using companies Governments that want to delay Banks, hedge funds, traders Consultancies (CDM verifiers, etc.) Corporate “bad citizens” in Southern countries • Hegemonic science

WHAT WILL COME TOMORROW…

The Rub… (i.e., The Science)

Emissions Must Go to Zero…( or negative & We may be OUT OF TIME…

?)

IPCC “wishy-washy” Copenhagen 12 March 2009

A late November 2008 meta-data report by the Public Interest Research Centre (PIRC) says:

“…critical climate [collapse]
processes might have begun … almost a century ahead of schedule…”

--Public Interest Research Centre. Climate Safety. 25 November 2008.

Double Rub… Are markets FAST enough & do they drive INNOVATION?

“Carbon trading may have been the
answer once but not any more... It will just take too long to achieve anything, and we no longer have the luxury of time.

”

--Professor Kevin Anderson, Director of the UK‟s Tyndall Centre for Climate Change Research, Discussion at the Royal Society, October 2008

Resistance…

Justice…

Or who’s winning loosing?
• • • • • Big fossil fuel-using companies Governments that want to delay Banks, hedge funds, traders Consultancies (CDM verifiers, etc.) Corporate “bad citizens” in Southern countries • Hegemonic science

Axis 2:

Who is resisting & where is justice?
• •
•

• • •

People fighting fossil fuel developments People struggling against companies benefiting from the Clean Development Mechanism (CDM), other offsets Local knowledge of low-carbon technologies & social organization Renewable energy movements Energy democracy & sovereignty Emerging, global climate justice movement

At least 2 NGO Tendencies…

Select Grass-top/Astro-turf NGO Offerings…

• John Bennett Executive Director, Climate Action Network: “Our acceptance of emission trading has secured us significant allies in the Canadian business community.”

Select Grass-top/Astro-turf NGO Offerings…
• Matthew Bramley, Director, Climate Change, Pembina Institute, CAN Member: “Those of us who do think there is a place for [“an embrace of market mechanisms”] accept that markets involve people making and trying to maximize profits. Obviously regulators must play a strong role to prevent abuses. But I don't accept that making profits out of emisisons trading is necessarily an abuse. The point I was trying to make was that profit-making opportunities resulting from

GHG reduction policies widen the constituency for such policies, thereby making their implementation more likely.”

New Revolving Door NGO- „Neoliberal Bird Flu‟I-4me-UR2
FOE, Greenpeace, WWF  Trading Houses, consultancies, etc.  Maintain CAN-International ties

VS. The Alternative NGO Tendencies…

Fighting for Climate Justice, Globally: Den Haag to Bali to Poznan & Beyond

Resistance inside CA, USA
(from the US) 19 February 2008

RADICAL NEW AGENDA NEEDED TO ACHIEVE CLIMATE JUSTICE Poznan statement from the Climate Justice Now! Network 12 December 2008
PART I Achieving low carbon economies, without resorting to offsetting and false solutions such as nuclear energy and "clean coal", while protecting the rights of those affected by the transition, especially workers. · · · Keeping fossil fuels in the ground. Implementing people's food and energy sovereignty. Guaranteeing community control of natural resources.

·
· ·

Re-localisation of production and consumption, prioritising local markets
Full recognition of Indigenous Peoples, peasant and local community rights, Democratically controlled clean renewable energy.

· Rights based resource conservation that enforces indigenous land rights and promotes peoples sovereignty and public ownership over energy, forests, seeds, land and water
· Ending deforestation and its underlying causes.

RADICAL NEW AGENDA NEEDED TO ACHIEVE CLIMATE JUSTICE Poznan statement from the Climate Justice Now! Network 12 December 2008 PART II · · Ending excessive consumption by elites in the North and in the South. Massive investment in public transport

· Ensuring gender justice by recognising existing gender injustices and involving women in decision making. · Canceling illegitimate debts claimed by northern governments and IFIs. The illegitimacy of these debts is underscored by the much greater historical, social and ecological debts owed to people of the South.

THANKS! PLEASE BE IN TOUCH… **I have FUNDS for TWO POST-DOCs at DARTMOUTH ** Dr. Michael Dorsey, Dartmouth College michael.dorsey@dartmouth.edu mkdorsey@professordorsey.com

Dr. Michael Dorsey, Dartmouth College Asst. Professor of Global Environmental Policy michael.dorsey@dartmouth.edu
• “Climate Knowledge and Power: Tales of Skeptic Tanks, Weather Gods and Sagas for Climate (in)Justice”, Capitalism, Nature, Socialism (CNS), Vol. 18, No. 2, June 2007

• Dorsey, Michael K. 2008. “The African American Climate Change Crisis: Quiet Nightmare or Subtle Opportunity?” Focus Magazine, January/February.
•Dorsey, M.K. 2007. “Green Market Hustlers,” Foreign Policy In Focus, June 19 (Washington, DC). •Dorsey, M. K. 2007 Carbon Trading Won‟t Work. LA Times. • Erion, G. C. S. and M. K. Dorsey. 2005. Montreal 2005 Climate Change Conference: Neoliberal BirdFlu Infects Climate Talks. The Bullet. •Dorsey, Michael K. 2005. Conservation, collusion and capital. Anthropology News Vol. 46, No. 7 (October), pp. 45-46. • Lohmann, Larry, Jutta Kill, Graham Erion and Michael K. Dorsey. 2005. “Is following the American pollution trading model a recipe for injustice in global carbon markets?” in P. Bond and R. Dada (eds.) Trouble in the Air: Global Warming and the Privatised Atmosphere (Durban, South Africa and Amsterdam, The Netherlands: University of KwaZulu Natal Press and Transnational Institute Press), pp. 149-86.

“If you are the big tree,We are the small axe --Sharpened to cut you down, (well sharp)” --Bob Marley


				
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