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Carbon Expo: depressed, optimistic, and financialised

Carbon Expo: depressed, optimistic, and financialised

Leverhulme Centre PhD student Robert Watt attended the world’s largest carbon market conference and trade fair in May 2013, supported by funding from the Gilbert Murray Trust’s UN Study Award. This is Robert’s account of the event.

Attending Carbon Expo was a great opportunity to meet the carbon market on a personal and experiential level, to increase familiarity with the market-place and its most recent developments, and to meet people who may be invited to participate in the forthcoming field work stage of the doctoral research. There were many discussions during the three days of the Expo in its plenary sessions, side-events, and exhibition spaces. Here I will mention just a few of the most prominent themes. I will call them depression, optimism, and financing value.

Depresssion

People at Carbon Expo displayed obvious concern about the current highly depressed state of the Kyoto, European and Clean Development Mechanism markets in carbon allowances and offset credits. Although the current low prices in the EU ETS and the CDM have been well documented, it was only at Carbon Expo that I was personally meeting people who had once been making huge profits from sales of offset credits but who now only held certificates that were next to worthless. Accordingly, some people had a sense of bitterness and disappointment. Many people have already lost their jobs as companies had closed their carbon trading desks. The Expo is much smaller in size than a few years ago. But most of the tears, I was told, have already been wiped away.

Optimism

Despite the state of the market, people were also notably optimistic about the outlook for carbon trading. The World Bank, which had a huge staff presence at the event, was trumpeting its Programme for Market Readiness that aims to create market-based climate policy instruments internationally. There were many discussions about the nascent Green Climate Fund, the future of the CDM, linkages between domestic carbon markets to create a global carbon price, new sources of finance, and so on. Even with the massively depressed state of the carbon market, the mood of the Expo was expectant for the future. One example illustrates the point: because of the terribly low prices, the World Bank no longer has reliable enough data to issue its usual State and Trends of the Carbon Market annual report; instead the Bank’s replacement report is about ‘mapping’ new pricing initiatives for future ‘developments and prospects’. Despite all the dark problems experienced now and in the past, people at Carbon Expo still believe in a bright future for carbon pricing and trading.

Financing value

A slightly more niche area of discussion that I followed with interest was about early-stage efforts to quantify the social, economic and environmental ‘co-benefits’ that can be created by carbon offset projects, particularly in the voluntary offset market. The voluntary carbon market primarily supplies offsets to companies who would like ‘carbon neutral’ adverts for a green corporate branding strategy. Voluntary carbon credits have maintained their market price – unlike most of the credits issued by the much larger but now almost defunct United Nations CDM compliance market – so this year’s Expo gave more attention to the voluntary sector than usual.

An effective way to raise the price of a voluntary offset is to sell it alongside a ‘story’ about ‘co-benefits’. This means telling a story about things like the jobs created through renewable energy projects, or the health improvements associated with clean cook stoves, or the biodiversity improvements in a forestry project. Conveying this in a story makes the offset more attractive to the corporate social responsibility teams who are the main buyers, especially if the underlying message resonates with the corporation’s core business activity (e.g. a drinks company buys carbon offsets and thereby improves water resources). Corporate, shareholder and public interest, according to those at the Expo, is no longer just about carbon neutrality: people want to see the wider benefits of an offsetting strategy, not only in terms of carbon.

Rather than merely telling a ‘story’, which can be seen as anecdotal and unconvincing, actors in the voluntary market are exploring ways of quantifying the co-benefits of their projects so the advantages can be demonstrated with numbers. With the numbers to back up the story, the offset credit price should go up, and so too profits. This gives rise to a loose form of commodification whereby the offset provider wants the (claimed) value of employment, health, biodiversity and so forth to be reflected in a higher market price for the carbon credit. People at the Expo were talking about extending the logic one step further, to the creation of tradable credits in assets like water and biodiversity. The difficulties in doing this were acknowledged. Quantification and commodification remain largely ideas at the moment, discussed without much clarity at the Expo. Yet a common refrain was that if it is possible to create tradable credits for greenhouse gases, then it can be done for other goods too.

In terms of my own research these proposals for attaching financial value to social and environmental goods are interesting because they reflect moral discourses and practices of concern tied in to a financial world of trading and business. Improving health outcomes, creating jobs, protecting biodiversity, improving access to water and so on are obviously good things, to be cared about and valued. The question people at the Expo ask is: how does one finance them? Since financing is the subject of their question, it points to a clear answer: sell the benefits to people who will buy them.

The buyers are generally corporate social responsibility teams. This leads to a rapprochement with the business world. Corporations become allies. Providing good things (health, water, jobs etc) in less developed areas – a moral quest – gets bound up with the green branding strategies of multinationals. Furthermore, since selling co-benefits to companies is the answer, the more the product looks like a genuine, quantifiable, certifiable commodity, the better. Selling an anecdote might make some money, but selling a verified story, or even a measurable commodity, should take business further.

Those at the Expo who are financing avoided carbon and its co-benefits profess to care about the value of protecting the atmosphere and about the value of livelihood improvements for people living in less developed areas. Their activity, despite its outward moralising concern and its attempt to create value, is nevertheless bound up with ethical problems. There are grave tensions in this process. According to those broadly on the left, corporations are the cause of much of the environmental and social upheaval that we witness today. Selling big business a green-philanthropic message for their customers and shareholders can serve to mask and disguise the destructive and exploitative practices which they engage in elsewhere. Consider these questions:

  • Are the offset stories credible, even when backed up with verification techniques, or are they deliberately misleading?
  • Even if the offset stories are credible, would this avoid the charge of hypocrisy and greenwash?
  • Is it acceptable for companies to do damage in one place, only to (pretend to) offset the malpractice elsewhere?
  • Are these efforts at corporate social responsibility merely shoring up a hugely problematic capitalist system which people ought to be working towards changing more fundamentally?

Engaging with the system: studying an ethics of compromise

By attending Carbon Expo, I began to understand the left critique of carbon trading better. Carbon trading negotiates with capitalism, with business, with banks, with governments – with that whole messy world of corruption and dollar signs. Going to the Expo involves flying, spending a £1,000 on registration, feasting, wearing suits, drinking cocktails, impressing with new gadgets, doing deals, talking to lawyers and the representatives of energy companies. The politics of the left is about radical reform of the system, not negotiation and compromise and submission to the will of the powerful in order to simultaneously make money in the process. Then again, as one offset developer put it to me: “It’s as if the critics on the left just wish that people in suits didn’t exist; but people in suits are not going to go away, so it’s sensible to work with them.” It is a defensible viewpoint. Inevitably the engagement with the system, the rapprochement with the corporate world, will provoke ethical dilemmas and moral compromises along the way. (Such is life: how many can claim purity in this world?) My job now is to investigate the dilemmas, and to discover the strategies that market actors employ in everyday situations to resolve and deal with the moral difficulties of carbon offsetting. The insights from Carbon Expo 2013 will feed in to a more substantial period of field research in coming months.

(Photo: Robert Watt)