By 2009, more than 17 years after the non-binding UN Framework Convention on Climate Change (UNFCCC) was adopted at the Rio Earth Summit, developed countries had channeled just $3bn in climate funding to developing countries. In contrast, developed governments – chiefly the US – invest over $700bn each year in global fossil-fuel subsidies, using taxpayer funds to externalise the true costs of carbon-intensive economies. Countries, like Nigeria, that experience oil-related ecosystem degradation estimate the cost of damage to the environment at $5bn per year.

Studies from the University of Berkeley attempt to measure the impact of 'ecological debt' between rich and poor countries. They argue that 'rich countries' owe the developing world $2.3trn for things such as deforestation, the depletion of fisheries, ozone layer depletion and the conversion of mangrove swamps to export-oriented fish farms between 1960 and 2000.

By repackaging climate finance under the umbrella of 'aid', developed countries exploiting the 'atmospheric commons' have managed to delegitimise the issue of ecological debt. This debt – which is managed by remote-control in a globalised world – is crucial to diagnosing the problem of climate change.

PAY YOUR WAY

In the process, entire continents, like Africa, which produce just 3-5% of global emissions, will be forced to bear the brunt of carbon-intensive global economic systems. By 2020, it is estimated Africa could lose 50% of its rain-fed agriculture harvest, while by 2100 the continent could lose as much as 90% of net revenue from crops thanks to climate change. Even Africa's major emitters such as Nigeria generate emissions chiefly through 'rich country' corporations such as Shell, via gas flaring which accounts for over 50% of industrial emissions. At 102m tonnes in 2005, the company's emissions were larger than those produced by 150 individual countries.

Yet in Nigeria, as in many developing nations, Shell's emissions count as the country's emissions.

The many hidden contours of the system precipitating climate change range from the illegitimate debt (acquired by the continent's anti-democratic leaders, resulting in the double-edged sword of debt repayment 'made possible' through the World Bank's structural adjustment programmes (SAPs) generating hard currency for repayment) to the impact of SAPs designed to develop export orientations to provide cheap cash crops to developed markets. Over 70% of Africa's water, for instance, is 'virtually' exploited for monocultures. It takes over 2,000 litres of water to produce just 300 grams of cotton.

Yet the Bank's policy of export-orientation renders the continent's most unequal societies as the product of political economies dependent on revenue from exhaustible resources – chiefly oil. From Nigeria to Equatorial Guinea, Angola, Sudan and Gabon, countries 'healthy' GDPs and considerable growth are characterised by militarisation, clientelism, rentier states, autocratic regimes and tremendous poverty and inequality.

MARKET SOLUTIONS FOR MARKET PROBLEMS

Proponents say that carbon trading is the solution to global warming in a market-based context. Through carbon permits and the commoditisation of 'pollution', the world's largest polluters are able to circumvent emission reductions, shifting the responsibility to underdeveloped nations. Permits establishing property rights over the atmospheric commons actually distract from the concept of emission reductions.

Instead, though as much as 90% of emissions traded by some European countries using the EU's Emission Trading System is estimated as fraudulent, major multinationals and developed governments continue to promote carbon trading as a viable source of climate funding. Carbon trading is being put down to supply over 40% of the funds required to help mitigate and adapt to climate change.

A further 20% of climate change funding will be sourced under current terms from developing countries themselves, while just 20% will be supplied by developed governments, chiefly through loans or repackaged aid commitments. This was the case with the UK's commitment to provide $800m in Copenhagen (or 'Hopenhagen' as it was called) for climate funds, financing that was already pledged in 2007.

A FINANCIAL ECOSYSTEM

It was at the Rio Earth Summit, where the UNFCCC was adopted, that the Chicago Climate Exchange (CCX), self-described at “the world's first and North America's only legally-binding integrated emissions reduction, registry and trading system”, delivered a paper advocating "a market-based solution to global warming". Founded just prior to the signing of the Kyoto Protocol by Richard Sandor, an economics professor known as 'Mr Derivatives', the CCX owns the European Climate Exchange, is intimately linked to former US Vice President Al Gore and had ties to the upper echelons of the UN.

The founding members of CCX includes major companies such as Ford, DuPont and Goldman Sachs which were instrumental in designing the carbon market system. The revolving door between 'development' bodies such as the World Bank is too close for comfort: Ken Newcombe, for example, helped shaped the Bank's Prototype Carbon Fund. Gore, one of the chief proponents of the Kyoto Protocol, co-founded Generation Investment Management, specialising in corporate 'green investments' such as carbon offsets – a process of offsetting pollution in underdeveloped countries as a means of evading emissions reductions.

In May 2010, CCX, alongside the European Climate Exchange and the Chicago Climate Futures Exchange, was purchased by the IntercontinentalExchange, an electronics futures and derivatives platform specialising in over-the-counter trading, a move that positions the system closer and closer to the 'too big too fail' syndrome.

POISONOUS DEALINGS

Like the derivatives bubble that caused the global recession, the carbon market and that of Clean Development Mechanism (CDM) projects are both vulnerable to gaming. A 2009 paper, "Scaling The Policy Response To Climate Change," by Benjamin Sovacool and Marilyn Brown, revealed a €4.7bn scam structured around trifluoromethane (HFC-23), a greenhouse gas used as a refrigerant. More than 70% of CDM projects were based on HFC-23, deliberately produced in excess by corporations that then claimed to 'offset' it in order to receive financial benefits via certified emissions reductions (CER) certificates.

The UNFCCC has registered 2,582 projects and issued 476,762,324 CERs. The carbon-offsetting organisation Carbon Retirement revealed that 28% of total funds received for CDM projects went to developing countries; 30% was received by banks and investors; 17% to company shareholders; and the remainder to taxes.

The mentality of the 'market solution' industry was disclosed by Jack Cogen, president of Natsource – which claims to be the world's largest buyer of carbon credits with $1bn in 'natural assets', who stated, "The carbon market doesn't care about sustainable development... All it cares about is the carbon price."

UPSETTING OFFSETS

The UNFCCC system, in addition to that of other initiatives such as the Kyoto Protocol, legitimises "flexibility points" – mechanisms that include carbon trading as well as the CDM, promoting the offset strategy. Annex 1 countries (or developed countries that are leading polluters) pledged, via a 'noted' but not binding accord pushed through by an exclusive group of countries in Copenhagen, to reduce emission by 12-18% of 1990 levels by 2020. China, an emerging country that could be classified as 'developing' - also rivalling the US for emissions, has committed to financing its own climate change requirements. Yet China, crucially, threw its weight behind the Group of 77 nations to demand that Annex 1 GDP countries spend 1.5% of GDP for climate finance, the equivalent of $600bn annually.

The World Bank has proposed, through the Climate Investment Funds unit, that the Bank levy a fee of $350,000 for each investment project, 40% more than standard development project fees. The Bank's President Robert Zoellick has promoted the Bank to developing countries as the ideal vehicle to engage in climate financing, a strategy embedded in leaked World Bank documents.

But it is not only through the World Bank that the foreign policies of developed nations are implemented - aid represents another key vehicle. As WikiLeaks recently exposed, US under-secretary of state for democracy and global affairs Maria Otero urged the Ethiopian premier and head of the Africa Union climate change negotiation's team, Meles Zenawi, to sign the Copenhagen accord, as it represented a point of departure for other discussions, or else.

As the UNFCCC noted, the first priority of developing countries concerning climate change mitigation should be poverty reduction, yet capital flight firmly prevents poverty reduction from being realised. Ironically, through similar developed-country policies, over 50% of small island jurisdictions – on the front line of climate change, are tax havens.

TAKE FROM THE RICH, GIVE TO THE POOR

Even worse, the financing that developed countries persistently claim cannot be raised, could be easily generated through a small financial transaction tax – also known as a Robin Hood Tax – on cross-border financial flows. Campaigners say such a tax could generate $400bn, chiefly from developed countries. Not only would this require information sharing on a multilateral basis as implemented within international agreements, but it would also allow for developing and developed nations to track and recover stolen wealth.

The issue of climate must be broadened beyond 'adaptation and mitigation' to a systemic overhaul, beginning at the fault line: the lack of political will on the part of systemically powerful pollution nations to correct imbalances of power in the market and the unregulated nature of international trade and financial transactions.

For the UNFCCC to have more legitimacy, these issues – fundamental to political economies integrated within the global financial architecture – must be acknowledged and made legally binding.

Unpacking the hot air industry
Khadija Sharife

The first priority for developing countries when it comes to climate change mitigation should be reducing poverty, but the market-based approach of carbon trading is doing little to alleviate imbalances in the system, writes Khadija Sharife.

BROUGHT TO YOU BY PAMBAZUKA NEWS

* This article first appeared in The Africa Report.
* Khadija Sharife is Southern Africa correspondent for The Africa Report.