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China's Botoxed image

By Arthur Thomas - posted Wednesday, 16 December 2009

ETS or carbon tax

Governments around the world are finding it embarrassingly difficult to explain emission-trading schemes to their voters. Even parliamentarians fail to comprehend how carbon-trading schemes work or how they motivate polluters to reduce carbon, or how much it will cost the consumer.

Australia's shift and understanding the ETS

Rejection of government policy demonstrated how the lack of comprehension destroyed Kevin Rudd's grand lesson to the international community on how to implement "innovative" and successful legislation.

While politicians regurgitate prepared text on the benefits of this new economic miracle involving the trading in trillions of dollars of carbon credits, they only succeed in convincing the voting public that emission trading schemes appear more like a new stock exchange for speculators with spare cash to capitalise on government subsidised schemes.


Trusting the finance sector in climate change?

If we consider the rhetoric and anticipated trillions of dollars involved, this market will redirect investment from within national economies. The ETS is a new vehicle for the finance industry, and after the global financial crisis, confidence in their role to manage the scheme designed to preserve the welfare of the planet for future generations is shaky.

This concern increases with the knowledge that the finance sector is the most powerful global lobby group motivated by self-interest. Just think of the massive fees to flow from the ETS's trillions.

China wind

Carbon traders, and the new breed of wind power operators (including JPMorgan's EcoSecurities), have their eyes on quick profits from carbon offsets and are supported by provincial governments pursuing massive foreign direct investment. The result is a massive CDM (Clean Development Mechanism) supported investment in wind farms remote from grids, or connected to grids incapable of handling the variable wind power.

Seventy per cent of wind-generated electricity is unusable and offsets no carbon emissions. The blind investment plunge has resulted in massive overcapacity and a mad scramble for markets. China's credibility in promoting renewable energy is questionable following its withdrawal of government subsidies for renewable energy generation and rejection of new applications. The move is primarily to ensure operator profitability falls below that required to qualify for CDM status, and projects that failed to comply with CDM requirements.

The wind industry now blames the UN Climate Panel for endangering the future of the industry. Roughly translated, "endangering quick profits", and nothing to do with climate change. The subsidy withdrawal and project cancellations appears more like a crude form of blackmail to pressure the UN Climate Panel.

Corporate responsibilities

ETSs are more about investor profits, and less about making a real impact on reducing carbon emissions. There is no legislation specifically requiring company directors to sacrifice legal profits for any unenforceable concept. Directors are legally obliged to protect the interests of the shareholders.


Feel good green comments are appearing regularly in annual reports, but that is where it stops. Don't blame the directors, they follow government guidelines.

A poorly managed scheme

While much is made of CDMs assisting developing nations to grow while reducing growth related emissions, the opposite appears the case.

China, India, Brazil and Mexico are the major beneficiaries of CDMs. China received 59 per cent of total global CDM investment. Just how much have the remaining smaller developing nations benefited?

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About the Author

Arthur Thomas is retired. He has extensive experience in the old Soviet, the new Russia, China, Central Asia and South East Asia.

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