Video: Meet the carbon traders
They started appearing at business and industry meetings in 2001 after Marrakesh — the UN climate meeting that established rules for a global market for trading greenhouse gases. Representatives for the emissions trading industry became increasingly more visible and today compete with rich, well-connected carbon-emitters for international influence. “You’re seeing a new commodity emerging that has been 10 … Continued
They started appearing at business and industry meetings in 2001 after Marrakesh — the UN climate meeting that established rules for a global market for trading greenhouse gases. Representatives for the emissions trading industry became increasingly more visible and today compete with rich, well-connected carbon-emitters for international influence.
“You’re seeing a new commodity emerging that has been 10 years in the making,” says Doug Russell, a former UN delegate from Canada who now consults on climate for private corporations. The industry was worth $126 billion this year, but that market could mushroom depending on the decisions being made in Copenhagen and in the years after.
Governments are turning to traders for expertise in how to reduce global emissions without collapsing the global economy, Russell says. “All representatives are looking at the International Emissions Trading Association.” For good reason: the IETA represents more than 160 companies worldwide, including many multinational heavyweights: top financial players (Citigroup, Deutsch Bank, Goldman Sachs, Credit Suisse), big oil (Shell, Gazprom, and Petrobas), large conglomerates (Mitsubishi , Dow Chemical, Rio Tinto) and others who smell big money in the new carbon economy (Deloitte and Touche, Lloyds Register, New York Mercantile Exchange).
Despite the impressive lineup, the traders are still an emerging force. “It’s a bit premature to talk about carbon markets gaining power at the moment,” says Henry Derwent, president of IETA. “Power remains in the hands of companies that need to reduce their emissions.” But IETA and related groups are rapidly gaining clout by providing industry with ways to reduce emissions by “trading” certificates that allow companies to release a given amount of carbon.
Sometimes called “cap and trade,” the idea is simple enough: governments give out or sell “permits” that allow companies to emit a given amount of carbon dioxide. Those permits are tradable and can become quite valuable, bought up by firms having a tough time meeting new emissions targets. The system is already in place in Europe and is gaining traction around the world. The deals emerging around the world have already sparked controversy, as seen in Carbon Watch, a new series by our colleagues at the Center for Investigative Reporting and Frontline World.
With so much money at stake, the financial industry has set its sights on the carbon trading biz. And like any corporation with a stake in the outcome of a global treaty, emission traders are lobbying lawmakers to make sure their interests are kept in mind.
“We are a lobbying organization,” says IETA’s Derwent. ”We say to governments, ‘Hey, you should do it this way, not that way.’” Sometimes governments are receptive, and sometimes it’s a tough sell, as in the United States right now. Before lobbying the U.S. Congress, he says, the traders have faced two major obstacles: first, challenging widely held beliefs that climate change isn’t really happening, and second, convincing lawmakers that the perilous financial industry is part of the solution.
“It’s our misfortune to be in a time when people aren’t liking the words ‘trader’ and ‘markets,’ at a time when people associate trading and banks with all sorts of financial shenanigans,” Derwent says. To help sway Congress, the carbon trading industry tripled the number of people it had lobbying in Washington during the first half of this year.
”We are in desperate need of low-cost solutions here,” Derwent explains. “We’re talking about the transformation of the world’s economy over an incredibly short period of time if we are to do what scientists tell us is necessary…” And the answer to that is using the carbon market “as a means of insurance.” Convincing the public to trust financial traders may be tough, he admits, but Derwent believes his industry knows the way forward: build your membership, increase your lobbyists, and apply pressure. In the end, he says, “the strategy is very simple.”