Great article by Douglas Kysar over at The Guardian.  Instead of proposing to pretty much keep the status quo and reward those who are already polluting, why not reward those people who are doing something about it?

Posted August 29, 2010 at The Guardian.

Not carbon offsets, but carbon upsets

Cap-and-trade has had the perverse effect of subsidising politically dominant industries. We should try something else.

These days, it’s hard to have inspiring Mr Chips moments when you teach climate change policy. My students at least seem increasingly demoralised by the tepid and technical nature of most climate debate. Which is probably why they recently challenged me to offer a proposal that was not only workable but game-changing. That’s a challenge even Mr Chips would struggle to meet, but here’s an attempt anyway: what if we could use the cap-and-trade system to reshape politics at the same time that we reduce greenhouse gas emissions? We can, if we move from carbon offsets to carbon upsets.

Last year, in a little noticed case, environmental groups and the United States government reached a settlement that will dramatically lessen future greenhouse gas emissions. The Overseas Private Investment Corporation and the Export-Import Bank of the US agreed to change the way they evaluate the climate impact of funded projects. But the groups that won the settlement received no credit – literally – and that’s a problem.

Contrast that story with “carbon offset” projects, which receive greenhouse gas reduction credits through some official process like theKyoto Protocol’s Clean Development Mechanism (CDM). These financial instruments can be so lucrative that firms actually raise production levels solely to create more pollution which they might then reduce. If that sounds crazy, it should.

In theory, carbon offsets are a way to lower the cost of emissions reductions. Credits are awarded when a project is less greenhouse gas-intensive than it would have been in the usual course. These credits can then be sold to polluters and used to satisfy their emissions reduction obligations which would have been more expensive to undertake directly. In practice critics have pointed to numerous problems with offsets. Most fundamentally, they fail to incentivise the kind of structural transformation toward a low-carbon future that we desperately need.

Here’s where “carbon upsets” come in: Rather than award credits based on development that moves us toward a cleaner but still very dirty future, why not award credits to legal and political actions that have more dramatic impact? For instance, rather than bribe fossil fuel companies tostop flaring natural gas, why not reward indigenous groups that entirelyblock new exploration activities? Rather than transfer money to logging operations for incremental replanting programs, why not award credits to forest-dwelling communities that successfully fight to stop logging altogether?

As with the existing offset approach, financial benefits could be shared in the case of legal and political activities that are “sponsored” by an international partner. Imagine a world in which global financial giants like Goldman Sachs devote themselves not to the exploitation of dubious arbitrage opportunities like HFC-23 capture, but to the identification and promotion of critical political interventions by disempowered voices for sustainability. In that world, the landmark deal recently brokered by the UN development programme to preserve Ecuador’s Yasuni national parkwould become a model of climate capitalism.

The carbon upset approach does not directly promote transformative clean-energy technologies. Instead, it aims to disrupt the political and economic inertia of the status quo. But that’s precisely the disruption we need. Conventional policies such as carbon offsets and allowance giveaways have the perverse effect of further subsidising already massively subsidised and politically dominant industries. Moving to a carbon upset system would open space for more dramatic transformations by empowering groups that stand opposed to the interests of business-as-usual beneficiaries. With the playing field tilted this way, who knows what might be possible?