A Starvin' Carbon Economy

08 September 2009

Carbon is predicted to become the world’s largest traded commodity if agreements are reached amongst western nations in Copenhagen in December. However this weeks revelation about carbon cowboys in PNG is but the tip of the iceberg as shysters move in to take advantage of this infant yet potentially incredibly profitable industry.

The revelations regarding corruption in the issuing of carbon credits created from the rainforests in PNG and the involvement of infamous operators including the PNG Prime Minister’s nephew shows how desperate regulation of the industry is needed BEFORE any agreements are reached.

For Carbon permits have one huge problem if they are to be the world’s largest traded commodity and that is their value is totally determined by government policy. Unlike oil, gold, wheat, indeed any commodity really it has a practical value which is recognised by the world market, however there is little to stop us emitting carbon. Now sure, we have permits dictating how many fish we take from the ocean, acres of land we clear etc, but in these cases we are dealing with commodities which have a demonstrable, indeed irrefutable environmental value, which needs to be managed for long term sustainability. No doubt it will be argued that carbon also falls into this category yet where is the irrefutable evidence?

For carbon permits to be of true value they need to have underlying backing just as when you buy groceries from a shop with the underlying value the market places on the Australian dollar. As public opinion becomes more and more sceptical of the science behind man induced climate change and if there is a change in government policy (Already the National party have stated they will not support and ETS and there are many rogue Labor and Liberal figures who do not support the policy either) then these permits may have no underlying value.

As I have stated on this blog before, I am not against the idea of man induced climate change. I am the first to say we should care for the earth and consume far less than we do, but using less and man causing climate change are two completely separate arguments.

If the permits are perceived to have no value as world opinion deems Carbon to not be the cause of global warming then all the billions being spent on schemes (or is that scams) in places like PNG will evaporate. For unlike oil or gold, a carbon permit has no material value, it only has value under a particular government’s policy.

The only real way a carbon permit can have any long term, irrefutable value is if irrefutable evidence is produced that it is the cause of climate change. Our politicians have not even come close to giving us this evidence, infact the only evidence we are given is that ‘a vast majority of scientists accept that dangerous man induced climate change is occurring.’ It was the same argument used by the Catholic church to dismiss Galileo when he proved that the sun is the centre of the universe.

So we are now left with a commodity whose market value is essentially unknown and yet is critical to everything we do in society how can anyone make any long-term business decision with certainty? The whole sorry scene is really rather amazing, so no wonder shysters are moving in to sell carbon credits as it is in such a vague an infant market that billions are made.

When irrefutable evidence is produced I will place as much value on a carbon credit as anyone else, however until then it is just one big scam.