Markets

Parts of the answer 3: Markets


Frustration at the slow pace of government - plus for some an ideological distrust of regulatory solutions - has encouraged many to look to market-based solutions to aspects of climate change.  The most famous are the emissions trading schemes (ETS) sanctioned under the Kyoto Protocol, up and running in Europe, and getting considerable attention around the world.  They turn carbon into a commodity that can be traded, and while mostly associated with industry emissions, voluntary trading markets such as the Chicago Climate Exchange also deal in credits from forest conservation and other products not recognised under Kyoto.

Though far from trouble-free, the progress of Europe's ETS has encouraged countries such as Japan and Australia to consider similar schemes.  It has also spurred interest in other market-based innovations such as investing in forest conservation to earn carbon credits, and helped strengthen the position of those liberal economists who would rather see government apply as light a hand as possible in tackling climate change. 

This is controversial in itself - can markets put a fair value on facets of the natural world jeopardised by climate change, from caribou to Africa's subsistence farmers?  But executives such as Shell's Jeroen van der Veer and the 140 global business leaders from companies as diverse as eBay, Swiss Re, and Shanghai Electric who signed the 2008 Poznań Communiqué on Climate Change have all expressed doubts about what market-solutions alone can deliver.  What's more, there is evidence that such markets can flourish without having the desired effects on emissions, and even those who say that if we're ever to meet the targets set under the Kyoto Protocol, we will need to include the so-called 'hot air' credits, i.e. the difference between emissions made by new EU Member States and Western Balkan countries during the Kyoto commitment period (2008-12) and target levels. Gábor J. Takácshas written on this issue, and remarks that allowing these countries to sell these credits can be viewed as compensation for the costs of transition, especially since additional emission reduction requirements could constrain their future economic growth.




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