Conceptually, carbon credits are fine and could have potential, but their current application is horribly flawed.
Metal Miner highlights how Cap & Trade can be gamed whereby it destroys developed nation jobs and doesn’t protect the environment either.
The example of Corus’ Redcar plant is a case in point. The plant was closed because key clients reneged on long term contracts and the 3m ton facility was left without enough sales to cover its costs. European steel producers receive about 2 tons of carbon credits for every ton of steel produced. Closure of Redcar will mean Corus will reduce its carbon emission by the equivalent of 6m tons of carbon emissions.
But Tata, Corus’s owners, are rapidly expanding steel production in India where it could receive hundreds of millions of dollars annually from the Clean Development Fund by building new plants that are less polluting than existing Indian plants (not less polluting than Redcar you understand, just less polluting than older plants in India).
As we have written recently elsewhere, the Indian steel industry is set to more than double production to some 124 million tons a year by 2011-2012. Even environmentalists must see this is a disaster for the reduction of carbon emissions. It merely transfers production from western steel mills where steel is produced in a carbon constrained environment to a non constrained market
Thus carbon credits can be gamed so that they pay for companies to shut down factories in developed nations and simply rebuild them in developing ones. Even if the new factory isn’t more efficient than the one shut down back in the developed nation. It apparently just has to be more efficient than older local plants in the developing country.