Carbon trading: the next sub-prime crisis?

13 November 2009


On 3 November 2009, the Friends of the Earth released a report suggesting that carbon trading could be the 'next sub-prime crisis'. Professor Steve Rayner, Director of the Institute for Science, Innovation and Society, was invited to write the foreword to the report, which indicates that plans to expand carbon markets at climate talks this December could trigger a 'sub-prime' style financial collapse.

Entitled 'A Dangerous Obsession', the report is being distributed to decision makers, media and campaigners ahead of a final round of UN climate talks to be held in Copenhagen this December. These talks aim to agree an ambitious new climate change strategy capable of preventing global temperature rises in excess of 2°C.

The report focuses on the buying and selling of a new artificial commodity - the right to emit carbon dioxide - which the UK and other governments of developed countries want to see expanded into a worldwide market. Yet the majority of this trade is carried out, not between polluting industries and factories, but by banks and investors who profit from speculation on the carbon markets. Carbon credits are being packaged into increasingly complex financial products similar to the 'shadow finance' surrounding the sub-prime mortgages which triggered the recent financial crisis.

Published just four weeks before the start of final negotiations in Copenhagen, 'A Dangerous Obsession' argues that this arrangement risks the development of 'sub-prime carbon' and the possibility of an eventual collapse in confidence in the market. That would have catastrophic consequences for the global economy and also for our prospects of protecting the world from a global warming catastrophe.

Professor Rayner called the report "an act of genuine courage against the backdrop of 'climate correctness.'" You can learn more about Professor Rayner's views on the Copenhagen conference in this interview from the BBC Radio 4 programme 'The World Tonight'.

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