Interview with Clive Spash: Why carbon trading won’t work

Chris Breen spoke to Clive Spash, former CSIRO economist whose controversial paper on carbon trading was censored by CSIRO management about the problems with Rudd’s CPRS, carbon trading and alternatives

Clive Spash resigned from his job as an environmental economist with the CSIRO after being censored by management late last year. CSIRO management wrote to the journal New Political Economy in July, withdrawing authorisation to publish Spash’s paper. He was later threatened by CSIRO boss Megan Clark for releasing it privately. Why?

Because his paper, “The Brave New World of Carbon Trading,” is a lucid and damning exposition of emissions trading, the model behind the Rudd government’s carbon trading scheme, the CPRS.
Spash argues that problems with carbon trading schemes cannot simply be designed away. Carbon trading, he concludes, is a dangerous diversion from real solutions to climate change.

You can access the full paper via Solidarity’s website at

Why do you think governments have pushed emissions trading as their preferred solution to climate change?

The rise of neo-liberal politics and the power of key corporate interests would be my suggestions. For example, the European Commission was originally in favour of a tax but was unable to get this approved. Lobbying by large polluters was certainly an important factor there and such lobbying is clearly cited in the Australian White Paper amongst the reasons why the government has chosen key elements of its own scheme. I cite literature on this in my paper CSIRO tried to ban and then censor (Spash, 2010).

The businesses of the financial sector, by acting as middlemen, advisors and consultants, are set to make considerable profits from such schemes. 

Clearly many in already powerful positions, able to lobby politicians and be heard, have strong self-interest in seeing emissions trading adopted. There are a variety of other options: direct regulation (e.g. improved building codes; restricting the most polluting inputs), subsidies, education, building new infrastructure, and so on. However, such options challenge the dominant political rhetoric that market solutions and minimal governance are best.

Some of its supporters claim that cap and trade has limited SO2 emissions in the US—is there a comparison?

The sulphur emissions scheme in the USA was very small scale affecting a limited number of key players and is not comparable with the complexity and scale of carbon trading.  The “success” of that scheme was simply to encourage some input substitution amongst coal fired power stations which switched to low sulphur coal. This could just as easily have been achieved by direct regulation.

Why do you think so many in the climate movement accept emissions trading?

This is part of a larger problem confronting the environmental movement in general.  I think there has been a shift in its core values and modes of operation—something I have described as new environmental pragmatism (Spash, 2009). 

Basically, the belief has become prevalent that talking in terms of market institutions and monetary values is the best way to achieve environmental protection.This has gone hand-in-hand with a move towards alliances with corporate interests by environmental NGOs. The idea is that political processes are dominated by economics and business so environmentalists must stop fighting these powers and cooperate with them. 

The lie within this area is that there is nothing else that can be done, the schemes of mainstream economists are the only thing that business will accept and this is better than nothing. The outcomes can actually be worse than doing nothing—massive wealth transfers to polluters who then increase the scale of their activities. 

Elements of the environmental movement seem more concerned with being invited to the table than analysing what they are doing there.  For such people there seems to be some fear of being seen as overly critical of powerful players or their schemes.

Then again, I’ve met many committed environmentalists who have their doubts about emissions trading but have lacked a way to articulate this or a document offering a dispassionate analysis of the critical issues. That is what I tried to offer in my work.

After Copenhagen, do you have much hope in agreement at an international level?

National and international governance fails when sole reliance is placed on the market mechanisms which helped create the problems we face in the first place. The real change required is to move away from a fossil fuel dependent economy and that requires fundamental structural change in transport and production systems and behavioural change amongst citizens.

The problem with even successfully setting a stringent emissions target is that this fails to address how that will be translated into action and achieved on the ground. 

Worse there is a pretence that humanity can simply set the global temperature at a safe level (e.g. 2 degrees) as if climate systems were some mechanical human device which we can simply choose to operate. 

I do not believe COP meetings have even begun to consider the real issues relating to cutting greenhouse gases by 80 percent, stated as required to achieve stabilisation, or the implications this has for society.

The failures of national and global governance go far beyond the inadequacies of a single meeting on greenhouse gas emissions control. Why should anyone expect such meetings to represent the concerns of citizens let alone do anything about them? Minority vested interests from concentrated power groupings seem far more likely to hold sway at the national and international levels.

You point to corporate manipulation of the market as one reason for the failure of emissions trading. Are there particular aspects of the Australian government’s scheme that points to failure?

My own research has been concerned with the general problems facing any emissions trading scheme, not the specifics of Australian government policy design. What I can say on this basis is that the general design principles are far from encouraging.

Those include: massive wealth transfers to major polluters, emphasis on protecting large scale exporters because they are also large scale polluters, protection for the transport sector rather than implementing fundamental change, open import of cheap unregulated offsets, and designing an inequitable system which penalises the small firm by making them enter an auction process while giving large polluters free permits.

Wouldn’t a carbon tax be similarly open to corporate manipulation?

Of course, any regulatory device can be captured by vested interests but some are more susceptible than others and different devices play to the strengths and weaknesses of different groups.
An example with respect to emission trading is the fact that corporations hold the information required to set-up the scheme in the first place. Thus under the European scheme industry was asked to tell the regulators their projected emissions levels. These estimates were susceptible to self-interested framing and manipulation or simple over optimism. 

The scheme suffered overallocation of free permits, and allowed some to make large profits by playing a speculative game on the open market.

The result of emissions trading is to hand regulatory control to polluters. We should then expect ineffectual regulation and wasted public funds. A carbon tax should avoid these problems by being designed as just one part of an overall strategy.

That taxes and direct regulation are likely to be more effective is in general evidenced by polluters lobbying against them, funding sceptics and supporting emissions trading. Under a tax, regulatory control and property rights remain more clearly within the remit of government.

Does real action to stop climate change need wider social change?

Yes—human induced climate change is merely one side effect of a modern economic system that measures human success as being the individual consuming and accumulating more and more stuff for themselves. The institutions of the market have so far offered freedom to a minority of the world’s population while the majority remain enslaved in poverty.

Yet the pretence is that continuing a model of economic growth will in the end provide higher living standards for all.  Most modern economists fail to take any account of social systems or political power. Choosing to explicitly exclude and consciously be ignorant of other disciplines has been the strength of modern economists, cloaked in their mathematical models, repeating the mantra of efficiency.

Today peace and security are equated with military and police. The environment is something to be fought, captured and controlled.
There is a serious need to revise the dominant model of progress.  Human and social well-being should be constituted of such things as social relations, cultural and environmental values, respect for others and having a range of basic needs met. Unfortunately we seem to live in a world of doublespeak where “freedom is slavery”, “ignorance is strength”, and “war is peace”.


Spash, C. L. (2009) The new environmental pragmatisits, pluralism and sustainability. Environmental Values 18(3): 253-256.
Spash, C. L. (2010) The brave new world of carbon trading. New Political Economy 15(2): forthcoming.


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