System Gaming the Planet
by ROB URIE
Rarely can a single story encapsulate so much of what is wrong with the economic system at work in the West as the one that follows. According to the New York Times (link), a group of industrial gas companies in India gamed the ‘carbon credit’ system to (1) increase the quantity of greenhouse gases emitted while (2) earning large ‘profits’ they wouldn’t otherwise have earned and in so doing (3) bought political influence to keep the practice going while (4) driving the price of their highly polluting product down so that (5) less polluting products couldn’t compete and (5) more of their highly polluting product was used. The purported intent of carbon credits is the exact opposite of all of this.
The basic story is that companies in India (and China) were producing a coolant gas that also produced a highly polluting waste by-product. Both the coolant and the by-product are potent greenhouse gases. Carbon credits were offered to induce the companies to destroy the by-product rather than releasing it into the atmosphere. But by paying the companies to both produce the gas and to destroy the waste the good capitalists running them quickly saw that the more gas and waste they produced the more money they made. In fact, it seems that the companies produced to the maximum limit of the carbon credits being offered, far more than they were previously producing, and then went home for the year.
The people running these companies knew that they were producing dangerous greenhouse gases and that their gain was the world’s loss. They were receiving carbon credits because their products were polluting. But what was economically rational to them, what maximized profits and paychecks, was to produce a much greater quantity of these products, and with them greenhouse gases, than they otherwise would have. They also understood that in a sane world they would be sent to prison for this behavior, or maybe even shot. So they took their ‘profits’ and bought political influence to see that this didn’t happen. The Koch Brothers couldn’t have done it any better.