My colleague Lauren Gifford interviewed me for Outreach, a daily published by the Stakeholder Forum here in Cancun, which will appear in print early next week. Here is what we came up with.

Climate Justice and Troubled Carbon Markets:

An Interview with Dr. Jerome Whitington

By Lauren Gifford

Dr. Jerome Whitington, an anthropologist with the Climate Justice Research Project at Dartmouth College in the U.S., studies emerging carbon markets. Here he answers a few questions on the state of carbon markets and their implications for climate justice.

What are carbon markets?

Carbon markets enable companies to buy and sell rights to emit greenhouse gas pollution to the atmosphere. The idea is that by putting a price on carbon, industries will have a good reason to invest in cleaner technologies, and consumers, hopefully, will pollute less because it will be expensive. Europe has the largest carbon market by far, the EU Emissions Tradition System, which helps it fulfill its commitments to the Kyoto Protocol. Under the KP, polluting industries in Europe must obtain permits to emit greenhouse gasses. If they don’t have enough permits they must purchase them, or buy offset credits from developing nations mainly through the Clean Development Mechanism. The CDM relies on pollution reductions in developing countries to fulfill these requirements. Some people are skeptical about the role of private businesses in fulfilling obligations that are essentially governmental in nature. Others point out that offsets purely entail transfer of a new form of natural resource wealth to the original colonial countries.

What’s been happening with carbon markets since COP15 in Copenhagen?

Copenhagen was a real let down for the people who were promoting carbon markets. Before Copenhagen, a lot of people were surprised at how hyped markets and other business solutions had become. The Copenhagen Agreement did not give markets the support they were hoping for and, combined with the financial downturn, a lot of trading offices and project developers have been bought up or closed down. In addition to that market consolidation, real questions have been raised about the legitimacy of carbon markets, especially around fraud and international offsets. There is also a regulatory move to ban projects that rely on destruction of HFC refrigerants and other industrial gasses due to gaming and valuation concerns. The only thing that market makers are happy about is that a major UN panel on financing for climate change solutions has said that they expect carbon markets to provide a major chunk of the financing for developing countries. Right now they are pushing to make projects faster and cheaper to develop using standardized baselines and benchmarking, which simplifies or bypasses additionality requirements. Of course not everyone thinks that is good news – it’s not clear that simpler rules will be accurate enough.

Who is most heavily involved in the carbon markets?

The carbon market landscape is pretty complicated at first glance, but one of the things we at the Climate Justice Research Project have shown is that there are very few serious players at the top. Fifty percent of the Clean Development Mechanism (CDM), which sells offsets in Europe, comes from just nine players in the primary market, and those all come from projects in China. Perspectives, EcoSecurities of JP Morgan Chase, Sindicatum and Orbeo are all dominant project developers, and Barclays Capital is the largest trading firm. Luckily, with the economic downturn, many of the less ethical carbon ‘hotsuits’ have been pushed out of the market.

On the institutional side, the World Bank has been trying to position itself as a leader in climate financing, including carbon markets. In terms of lobbying efforts, groups to watch are the International Emissions Trading Association (IETA), the Project Developers Forum, and the Carbon Market Investors Association (CMIA).

What are the justice issues relevant to carbon markets?

I’ve already mentioned the neocolonial implications with offsets. Carbon markets can also put developing countries at a disadvantage when private companies buy the so-called ‘low-hanging fruit’, leaving governments with responsibility for more expensive reductions if or when they have commitments under a post-Kyoto regime.

As we’ve seen recently in financial markets generally, there’s a real risk that carbon markets can actually create uncertainty in the solutions for dealing with climate change. With carbon markets the devil is in the details, and it is often confusing how these markets work in practice. Of course, confusion is the last thing we need with climate change, and a really dangerous trend is that some people use carbon markets to make climate skeptic arguments.

At best, carbon markets enable wealthy countries to keep polluting; at worst they allow increased emissions with a green-washed veneer. Carbon markets create another way for wealthy investors to profit from privatizing the environment, furthering the divide between rich and poor, and the global north and south. Amid the tremendous vulnerabilities people face, increased disparities for marginalized populations may be the greatest tragedy of all.