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What is carbon trading?

Carbon trading is the process of buying and selling permits and credits to emit carbon dioxide. It has been a central pillar of the EU’s efforts to slow climate change. The world’s biggest carbon trading system is the European Union Emissions Trading System (EU ETS). It is beset with problems and corruption and yet countries such as Brazil and China continue to pursue carbon trading as a way to tackle rising emissions.

Carbon trading is increasingly criticised, not least because carbon dioxide emissions in industrialised countries are not declining at the necessary rate to avert catastrophic climate change.

For more information about carbon trading, see Fern’s beginners guide Trading Carbon. How it works and why it's controversial, or the 20 page version 20 page version Designed to fail.

Fern and many scientists, economists and NGOs believe that carbon trading is a dangerous distraction from the need to end fossil fuel use and move to a low carbon future. We do not have time to wait for a high price on carbon: we must shift to a low carbon energy, agriculture, transport and industrial world now. The best way to do this is through direct regulation.

Fern’s initial interest in carbon trading came about because trees were seen as a way of offsetting carbon cheaply, while simultaneously providing money to protect trees. What are offsets explains why you can never offset carbon by protecting or planting trees. There is also no evidence that carbon trading has lived up to the promise of providing money.

Despite the flaws inherent in pollution trading, the concept continues to appear in proposals to reduce environmental harm. For more information visit our campaign on biodiversity offsetting.


Most recent publications

An end to forest offsets

This manual was put together by the partners of the Grundtvig Learning Partnership “Forests and climate protection – merging topics in environmental education”. It provides background information for developing new approaches in environmental education focusing on the intricate relation of forests and climate. For fully footnoted and referenced information about the problems with carbon trading and offsets please see Designed to fail.

PDF iconAn-end-to-forest-offsets-final.pdf355.36 KB

Submission to the UK climate change committee enquiry into the EU ETS

This submission to the "EU Emissions Trading System: New Inquiry" shows that fundamental flaws in the design of the EU ETS have been exposed by (a) a series of fraud and cybercrime incidents; (b) the excessive use of carbon offsets by companies hoarding higher-value EU ETS permits received free of charge; and (c) the lack of a functioning regulatory possibility to adjust thesupply of EU ETS emission permits to a sharp economic downturn, and theresulting drop in emissions far below projected levels that were used to calculate permit allocation.

Submission to UN consultation on new market-based mechanisms to enhance the cost-effectiveness of, and promote, mitigation actions

This submission concludes that the EU ETS and the Kyoto Protocol’s carbon trading schemes have been designed to fail: they assume the contribution of carbon permits and offset credits to limiting greenhouse gas emissions to a verifiable target to be the same, when in reality they are not because calculation of offsets depends on unverifiable hypothetical baselines from which offset volumes are calculated.

FERN submission to a commodity futures trading commission study

FERN’s input into the Commodity Futures Trading Commission and interagency working group’s forthcoming study on the oversight of existing and prospective carbon markets. It concludes that the EU Emissions Trading Scheme and the Kyoto Protocol’s carbon trading schemes have been designed to fail and that it is difficult to see how subsequent regulation could remedy a situation where the challenge is not to remedy design flaws but where the design is the flaw.  

ForestWatch Issue 155 December 2010

  • Social criteria are permissible in timber procurement policy
  • Questions remain about Cancun forests agreement
  • A bold move: the EP votes to address ECA flaws
  • The future of CAP: opinions welcome
  • Agrofuel plans drive destruction

PDF iconFW 155 December 2010.pdf217.33 KB

Designed to fail? The concepts, practices and controversies behind carbon trading.

Carbon trading has become the central pillar of international efforts to halt climate change. It is a term that most people will recognise, but far fewer will have a good understanding of what it means and how it is supposed to work. Fewer still will feel confident to judge whether it is a success or not.

PDF iconFERN_designedtofail_internet.pdf796.56 KB