It was the suits and ties that worried me most.

I saw them while sitting at a dinner table with four farmers during an awards ceremony at the conclusion of a carbon conference in New South Wales, Australia. The conference had highlighted carbon farming (and ranching) success stories from across the vast continent where landowners were sequestering carbon dioxide in soils, improving water cycles, and producing food sustainably. Called the ‘Carbon Cocky Awards’ (for their ‘cocky’ attitude toward the status quo, I think), the evening featured inspiring stories, good humor and plenty of beer, of course.

It featured lots of smiles too. In fact, all during my visit Down Under, I had been deeply impressed by Aussie good humor and ‘can do’ attitudes. You hear it in their everyday conversation, which is peppered with “Right-O,” “Good on ya,” and “No worries.” This language creates positive vibes in personal relations, even with foreigners, that extends to Australian culture as a whole, it seemed to me. It might also explain why Australians are consistently on the cutting edge of innovative practices and out-of-the-box thinking, especially in the agricultural field. The carbon conference I spoke at was a good example. There was hardly another one like it in the world, as far as I knew. Aussies just thought it up and did it. No worries!

Ditto with national climate legislation. In August 2011, a cap-and-trade bill passed through the Australian Parliament and was signed into law by the Prime Minister, Julia Gillard, over noisy objections. It was only the second time a major governmental body had done such a thing, after the European Union. In the U.S., the House of Representatives passed its own cap-and-trade legislation – just barely – in June 2009, only to see it die a slow, agonizing death in the U.S. Senate the following year. It was as close as Congress ever came to passing climate change legislation, and by the look of things today it may be as close as it will ever come. Politically, cap-and-trade (sometimes called a carbon tax) has become kryptonite to many Republican lawmakers – perhaps not without good reason.

A raucous debate, with plenty of acrimony and doomsday naysaying by opponents, took place in Australia’s Parliament in 2011, but with one difference: they passed the bill and it became law. Called the Clean Energy Future Package, it went into effect last July, and contrary to the predictions of the naysayers the world did not come tumbling down. Its goal is to reduce greenhouse gas emissions by 5% below 2000 levels by 2020 and 80% below 2000 levels by 2050. It does so by placing a carbon tax on the 300 largest polluters and redistributing the revenue generated to a variety of renewable energy enterprises and other efforts, including payments to farmers to sequester carbon dioxide in their soils.

Which is one reason why there were so many smiles at the Carbon Cocky Award ceremony!

This isn’t the HMS Titanic, it’s pollution from a coal plant:

A few weeks ago, California became the next major player to sign up for cap-and-trade when Governor Jerry Brown signed legislation creating the first official carbon market in the U.S. It takes effect on January 1, 2013. I’ll come back to California in the next posting.

All this activity begs a question: What exactly is cap-and-trade? Here is the EPA’s brief definition: “Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth.”

Here is Wikipedia’s longer definition: “A central authority (usually a governmental body) sets a limit or cap on the amount of a pollutant that may be emitted. The limit or cap is allocated or sold to firms in the form of emissions permits which represent the right to emit or discharge a specific volume of the specified pollutant. Firms are required to hold a number of permits (or allowances or carbon credits) equivalent to their emissions. The total number of permits cannot exceed the cap, limiting total emissions to that level. Firms that need to increase their volume of emissions must buy permits from those who require fewer permits. The transfer of permits is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society.”

Did you catch the words “in theory” in that definition? To critics of cap-and-trade – and there are many – the reality of actual greenhouse gas emission reduction could easily prove to be illusory. First and foremost, a ‘cap’ in emissions is not the same as a ‘cut’ in emissions, i.e. if emissions are too high already – and they are – capping them won’t be sufficient to avert serious climate disruption over the long run. A lot of this is captured in the word ‘offset’ – which describes the ability of a polluter to merely offset its pollution. In other words, a coal plant, by buying a offset credit on the carbon market, gets to keep polluting, albeit at a slightly reduced level.

There are other objections. Here are some of mine, from an essay I wrote in 2010 called ‘The Carbon Ranch’:

  • It is not acceptable to let a big, industrial polluter ‘off the hook’ with an offset simply because they have money or political clout. Also, there are moral and ethical implications to letting polluters redeem themselves with offsets, the way medieval nobles bought indulgences from the Church for their sins (for a powerful parody of this situation see, where philandering adults can buy offsets from monogamous couples so they can keep on cheating).
  • It is unrealistic to expect the same system that created the climate problem in the first place – i.e., our current economy and specifically its financial sector – to solve this problem and to do so with the same tools. Furthermore, it is not ok for Wall Street to profit from a problem it helped to create. Besides, isn’t that like having the fox guard the henhouse?
  • Cap-and-trade can easily become ‘cap-and-swindle.’ At best, offsets may be illusory; at worst they’re fraudulent – thus imperiling the whole purpose of the idea. This concern is captured in an investigative report by the Christian Science Monitor published on April 20th, 2010, titled “Buying carbon offsets may ease eco-guilt but not global warming.” The investigation found that people buying offsets are getting “vague promises instead of the reductions in greenhouse gases they expect.” They are buying into projects that are never completed, or are paying for ones that would have been done anyway. Mostly they feed shady middlemen and promoters seeking profits from green schemes, said the report’s authors. “Carbon offsets are the environmental equivalent of financial derivatives: complex, unregulated, unchecked and – in many cases – not worth the price,” they write.
  • The monitoring required to quantitatively verify actual and additional (meaning a net increase) in CO2 sequestration in the soil in order to satisfy the marketplace is too complicated, cumbersome, expensive, and intrusive for many landowners. Out West, this is an especially sensitive topic, as many ranchers already feel like there are too many people-with-clipboards walking across their land. If protocols are not considered comprehensible and ‘user friendly’ by landowners, then skepticism will remain high in a community that already has doubts about climate change generally.

To this list I would add now: suits and ties.

Seated at our dinner table at Carbon Cocky Award ceremony were three young men dressed in very sharp suits. They were smiling too. One gave me his business card, which he also handed to the farmers. On it, he was self-identified as an “Aggregator” – which is a fancy term for the middle-men in the carbon marketplace. They sit squarely between polluters who need credits and farmers who need money, constantly wheeling and dealing. Middlemen in suits and ties.

I looked at the young men at our table, and thought “Aggregator is a fancy word for shark.” Instead of smelling blood, these guys smelled money. Lots of it. Their unctuousness reminded me of used car salesmen, or Wall Street vampires, or some other type of Ponzi huckster. That’s harsh, I know, but as I sat there I couldn’t help feel that the affable, earnest, down-to-earth farmers were just another form of red meat to the three smiling Aggregators, waiting to pounce. I could almost the blood in the water.

After the ceremony, I left the young man’s card on the table.

Is cap-and-trade the answer to our troubles? I don’t know, but I have my doubts about any scheme that attracts sharks. Maybe California’s new program is shark-proof, we’ll see. In the meantime, we still must deal with a vexing problem for any carbon market that intends to support farmers and ranchers in their effort to sequester carbon dioxide: profitability. If not cap-and-trade, then what instead?

Why is this shark smiling?: