A nice thing about markets: they have a way of expressing themselves with minimal spin. Just consider the eight point seven percent plunge of futures on EU carbon dioxide permits after the Copenhagen climate “deal” was announced (UN contracts took a similar dive). The message in this swoon is that the understanding in Denmark has a lot in common with the pastry named for the host country: sugar-coated, not particularly nourishing, and yes, rather cheesey.
The so-called Copenhagen Accord, negotiated between the US, China, India, Brazil and South Africa, is not binding, and despite this fails to reach UN targets to prevent “catastrophic” climate change even if it were implemented. Everything from developing nation aid to China’s willingness to accept compliance verification is left squishy, another trait shared by Accord and pastry. Twenty some-odd nations signed on (whatever that means) while many of the rest of the 193 countries represented only consented to “take note” of the document, which is to say acknowledge its existence. – very postmodern, no?
Unsurprisingly, those who trade and utilize the right to pollute evaluated the odds of Obama, Hu & Co.’s fluffy and legally vacuous understanding having any effect on future restriction on carbon dioxide emissions and responded accordingly: they sold. Carbon rights are worth a lot less in a world where the ability to pollute is unlikely to be diminished in the foreseeable future.
There may be some lessons to be learned from the fiasco in Denmark. If any progress is to be made in limiting pollutants it may have to be achieved in negotiations between the principal polluters, as opposed to a forum with almost two hundred nations, many of whom are simply being asked to accept some degree of first-world largesse. Moreover, the governments of the G20 and their industrializing like may have to be motivated by demands from their own (currently otherwise engaged) populations before they take real action on global warming. That popular will may only come from locally oppressive climactic change, or else as a side effect of the increased cost of scarcer fossil fuels. Not a recipe for either rapid or painless progress.
Paul Samuelson taught that consumers’ desires, as represented by what economists call “utility” could be studied through the theory of “revealed preference”, essentially by analyzing purchasing behavior. It is perhaps appropriate in the wake of that grand old man’s passing that we have been given a peek at the preferences of polluters (who are, in the end, all of us) though the purchasing of carbon futures. Though it was known for some time that the chance of anything of substance coming out of Copenhagen was vanishingly small, the ability to pollute is held so dear that even the removal of an infinitesimal chance of its attenuation succeeded in engendering a marked sell-off in futures of that right. We are, it seems, a species determined to foul its own nest, or at least to consume that whose byproduct has this effect. The question is, how uncomfortable will we have to become before we give this planet a break?