CARBON TRADING, OFFSETS AND DERIVATIVES
Research by Larry Lohmann and publications of the carbon watch organization show how the cap-and-trade system thinking emerged from the neo-liberalist philosophy in the 1990s. According to the former executive secretary of UNFCCC, Michael Zammit Cutajar, it is “not an exaggeration to brand the mechanisms of the Kyoto Protocol as ‘Made in the
But it was not only the
It is not surprising that the Rio Earth Summit of June 1992, notwithstanding its being an important bench mark in the history of humanity and of the Earth, was also based upon that neo-liberalist philosophy. It defended an ‘open economic system’ based on economic
growth and it also considered TNCs as positive agents of ecological change – ‘promoting
sustainable development through trade liberalization’.
What is less well known is that several of those authors in the EDF and UNCTAD emission trade system became involved in the design of derivatives, the major cause of the financial crash of 2008.
Frank Joshua, head of greenhouse gas emissions trading at UNCTAD from 1991 to 2000,
went on to become global director for emissions trading services at Arthur Andersen,
the accountancy firm at the centre of the Enron scandal, before joining NatSource, an
environmental services firm specializing in emissions trading. In the early 1990s, Joshua
collaborated on an UNCTAD initiative entitled ‘Building a Global CO2 Emissions
Trading System’ with Richard Sandor, a former head of the Chicago Board of Trade,
and one of the originators of the interest rate derivatives. Sandor went on to head UNCTAD’s working group on carbon market design. He later set up the Chicago Climate Exchange (CCX), which today commands a small but growing segment of the carbon markets.
Alice LeBlanc, another key figure in the UNCTAD initiative, was an employee of
Environmental Defense at the time. She later joined Sandor at the Chicago Climate
Exchange, before becoming head of the climate change office of insurance firm AIG,
where she devised the firm’s carbon market investment strategy. Besides creating problems of conflicts of interests these interconnections of the revolving doors variety hint at broader links between the rule-setting process for carbon markets and the agencies that established the derivatives markets.
The urgency of both the economic and climate crises demand that a new sustainability philosophy be developed. The Tierra Monetary Paradigm with its two pillars of Cap & Share and its transformational monetary approach of a carbon-based international reserve currency wants to make a contribution to such sustainability philosophy that integrates economic, social and ecological challenges involved in both crises.