The COP-18 environmental conference held in Doha has come and gone. In the wake of high expectations for a successor treaty, the Kyoto Protocol was extended, but only after bitter debate – and several countries have withdrawn from the process or signalled their intent to do so.
Moreover, many observers believe the decision to extend the Protocol was primarily the result of countries not having the courage to stop or scuttle it outright, and not actually knowing what to do next. So the easy way out was to just extend Kyoto and also promise the developing world lots and lots of dollars for “climate mitigation,” which is a sort of apology from the first world for having allegedly messed up the planet in the first place with their fossil fuels and economic development.
Whether the billions of promised aid dollars will really materialize is another matter. But a lot of people have already gotten rich – including Al Gore, hundreds of climate scientists, and thousands of environmental activists and government bureaucrats – and others are trying to cash in.
I recently read an article in a South African magazine concerning carbon trading. Headlined “The Big C is a Money Tree,” the article included a picture of a tree with hundreds of dollar bills hanging on the branches. Its essence was that people can easily make loads of money in the carbon trading business. Unfortunately, much of the sentiment was correct. So alarm bells should be ringing.
When it appears easy to make a lot of money from something simple, then in all probability something is wrong. The economic rules which govern the world usually dictate that it is not easy to make a lot of money with not much effort.
Consider the hamburger market. If it is easy to sell a large number of hamburgers and make a lot of money, then what happens is a competitor joins the market, then another, and another. The result is that the quality of the hamburgers goes up and the price comes down. This is all because the natural competition forces the sellers to offer the best quality at the lowest price.
If one of the hamburger sellers can’t make the grade, he goes out of business. None of the hamburger sellers really wants to be kind and sympathetic to the consumers, but they have no option but to be attentive to their customers or the customers just go to a competitor. Hamburger suppliers have to offer a good product at a good price to stay in business. So the basis of the hamburger business is good cooking, good service and efficient meal production.
So one can ask the question: What is the basis of the carbon trading business? It is buying or renting air with less carbon dioxide (CO2) – based on assertions that CO2 causes global warming, climate change, and more frequent and intense storms, droughts and floods. Sounds dicey, doesn’t it?
What happens is that if some company, say in Germany, wants to extend its factory, and they are going to have to produce carbon dioxide gas (CO2) in the operation of the plant, they may find that they will exceed their CO2 emission quota.
If a company in Germany wants to expand its factory, and operating this larger facility will produce carbon dioxide, the new operation may exceed the company’s CO2 emission quota. One way out of this predicament is to come to a country like South Africa and find some land where workers can grow plants that take CO2 out of the air. Another is to find a factory that emits CO2 and help it buy and install technology that removes some tons of CO2 from the factory’s emission.
(There is a type of South African cactus called Spekboom, which translates as “bacon tree.” The connection between cactus and bacon is not clear. It’s easy to plant. You just break off a soft branch, push it into the ground, and it grows – normally to about a meter tall, but sometimes to 3m over many years. Spekboom grows in arid areas like weeds and is generally useless. But it apparently absorbs much more CO2 than normal plants. So Europeans pay South Africans tidy sums to plant fields of the stuff. The Europeans then claim “carbon credits” and feel righteous, while South Africans get rich watching weeds grow.)
Each time one of these operations removes 10 tons of CO2 from South African airspace, the German company can put the same amount of CO2 into Germany’s air and (presto!) all is great again, because on balance the total CO2 emitted into whole world’s atmosphere is equalized.
Then the German company pays the South African company a lot of dollars per month to keep South Africa’s air “clean,” so that the German company can put the “saved” CO2 back into Germany’s air.
So the basis of the carbon trading business is to rent “clean” air from somebody else.
Therefore if you launch a major project to develop a new factory, and a significant part of the budget is carbon trading income, then don’t forget that renting clean air is part of the asset of the business.
If the Kyoto Protocol collapses and the clean air requirement falls away – then your investment blows away in a breeze … of “clean” air. That would be disastrous for you. And that is a primary reason why so many people are determined to perpetuate Kyoto in some form or another.
Many people would never build their new factory on a foundation of sand. But they are happy to build it on a foundation of air. I say: “Be careful.”
If it turns out that man-made industrial CO2 is not leading to climate change then the whole carbon market could disappear faster than a puff of wind.
Remember that the measured increase in the earth’s atmospheric CO2 concentration over the last century does not match global temperature increase very well; in fact, a good correlation is distinctly absent. Furthermore, a competing theory argues that the sun’s magnetic influence on incoming cosmic radiation seems to match the observed temperature profile of the planet a lot better; this theory relates to varying cloud cover, influenced by the varying amount of incoming cosmic radiation.
The carbon trading business seems too good to be true. Money trees are not common. Warning bells should be ringing.
Dr. Kelvin Kemm is a nuclear physicist and business strategy consultant in Pretoria, South Africa. He is a member of the International Board of Advisors of the Committee For A Constructive Tomorrow (CFACT), based in Washington, DC (www.CFACT.org) and received the prestigious Lifetime Achievers Award of the National Science and Technology Forum of South Africa.