The Carbon Trading Money Tree

The COP-18 environmental conference held in Doha has come and gone. In the wake of high expectations for a successor treaty, the Kyoto Protocol was extended, but only after bitter debate - and several countries have withdrawn from the process or signalled their intent to do so.

Moreover, many observers believe the decision to extend the Protocol was primarily the result of countries not having the courage to stop or scuttle it outright, and not actually knowing what to do next. So the easy way out was to just extend Kyoto and also promise the developing world lots and lots of dollars for "climate mitigation," which is a sort of apology from the first world for having allegedly messed up the planet in the first place with their fossil fuels and economic development.

Whether the billions of promised aid dollars will really materialize is another matter. But a lot of people have already gotten rich - including Al Gore, hundreds of climate scientists, and thousands of environmental activists and government bureaucrats - and others are trying to cash in.

I recently read an article in a South African magazine concerning carbon trading. Headlined "The Big C is a Money Tree," the article included a picture of a tree with hundreds of dollar bills hanging on the branches. Its essence was that people can easily make loads of money in the carbon trading business. Unfortunately, much of the sentiment was correct. So alarm bells should be ringing.

When it appears easy to make a lot of money from something simple, then in all probability something is wrong. The economic rules which govern the world usually dictate that it is not easy to make a lot of money with not much effort.

Consider the hamburger market. If it is easy to sell a large number of hamburgers and make a lot of money, then what happens is a competitor joins the market, then another, and another. The result is that the quality of the hamburgers goes up and the price comes down. This is all because the natural competition forces the sellers to offer the best quality at the lowest price.

If one of the hamburger sellers can't make the grade, he goes out of business. None of the hamburger sellers really wants to be kind and sympathetic to the consumers, but they have no option but to be attentive to their customers or the customers just go to a competitor. Hamburger suppliers have to offer a good product at a good price to stay in business. So the basis of the hamburger business is good cooking, good service and efficient meal production.

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