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Climate Change & Environment

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Carbon Trading: How It Works and Why It Fails
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Despite having a disastrous track record, carbon trading is still being promoted as the central solution to climate change. Addressing today’s climate challenges requires a paradigm shift away from market-based strategies, argues a study by Oscar Reyes and Tamra Gilbertson.

Link to full booklet: Carbon Trading - How It Works and Why It Fails

25th November 2009

Preface to the Book

23rd November 2009 - Henning Melber, The Dag Hammarskjöld Foundation

The Copenhagen process must address the reality of the larger eco-systems challenge we face. Healthy ecosystems are a precondition for stabilising the climate system. But the current negotiations are not addressing critical issues related to the resilience of ecosystems and to ecosystem services and are thus seriously flawed.[1]

During the autumn of 2006 the Dag Hammarskjöld Foundation, in collaboration with The Corner House and the Durban Group for Climate Justice, published a pioneering challenge to what had become the core of official international efforts to solve the ever more visible crisis concerning climate change and the urgent need to reduce emissions.[2] Based to a large extent on the work of Larry Lohmann, the publication was at the forefront of a necessary intervention to demystify the dominant exit options on offer – which were only ending in another cul de sac.

Since then, public awareness has become more sensitised to the problems of treating carbon trading as a ‘silver bullet’ for solving the climate crisis. Common sense should already suggest that things are not so simple: setting up a market in a new commodity is bound to be an invitation to traders to focus their ingenuity on profit-seeking even if the results undermine climatic stability.

Our publication soon became a standard reference book, and we registered record hits on our website.[3] The huge demand also resulted in a second imprint, after well over 10,000 hard copies had been distributed. On a more self-critical note, however, as necessary as the fundamental analysis was, the sizeable volume of 350 pages contributed a considerable carbon footprint through the paper and energy needed for its distribution. In addition, while the book laid out convincing arguments, it was not the most effective tool for those who needed a concise introduction to the problem. The idea of producing an updated shorter version therefore emerged quite soon, though the project required some time. Thanks to Oscar Reyes and Tamra Gilbertson and with the support of Larry Lohmann, we are now able to offer this briefer, updated input for the discussions around Copenhagen.

At a time when carbon trading is still being strongly promoted as the central solution to climate change, we continue to stress that it is, instead, part of the problem. But this volume also does not hesitate to look forward and thereby complements a parallel effort looking into the challenges beyond Copenhagen.[4]

Meeting today’s climate challenges requires a paradigm shift in our thinking and approaches. Market-based strategies have failed. We need to demystify the claim that price incentives alone will fix matters.


[1] Bo Ekman, Johan Rockström and Anders Wijkman, Grasping the climate crisis: A provocation from the Tällberg Foundation, Stockholm: Tällberg Foundation (undated, 2008/2009), p.17.

[2] Carbon Trading: A critical conversation on climate change, privatisation and power (Development Dialogue, no. 48), Uppsala: The Dag Hammarskjöld Foundation, September 2006. Like all recent publications, this volume is accessible for free download at the Foundation’s website (

[3] The combined total number of downloads from the sites of the Corner House and the Foundation amounted to over 820,000 by October 2009, i.e. within three years.

[4] Ulrich Brand, Nicola Bullard, Edgardo Lander and Tadzio Müller (eds), Contours of Climate Justice: Ideas for shaping new climate and energy politics (Critical Currents, no. 6), Uppsala: Dag Hammarskjöld Foundation, November 2009.

Oscar Reyes works on Transnational Institute´s Environmental Justice project, is environment editor of Red Pepper magazine.

Tamra Gilbertson is one of the founders of Carbon Trade Watch, a project of the Transnational Institute.

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