Adam Smith and Karl Marx disagreed about many things, but they would surely have concurred that the very idea of a ‘carbon market’ is bonkers. Carbon dioxide is an invisible gas and a naturally occurring substance. When it is produced as a waste product from another process, like burning fossil fuel, it cannot be used for anything else. How on earth could carbon dioxide, as waste product, have a value and be subject to exchange? How could it become the gaseous analogue to money or gold, an atmospheric ‘universal equivalent’ into which other gases can be converted?
The carbon market in 2007 was worth $64billion: how could this be? A market is supposed to be the exchange of products that are the result of somebody’s work, for the satisfaction of somebody else’s needs. Smith stated that the value of the product is proportional to the amount of work expended in it: ‘The real price of everything’, he wrote in the Wealth of Nations, ‘is the toil and trouble of acquiring it’ (1). This goes for markets in bread or tables, iTunes or diamonds, no matter what nature the ‘work’ or how frivolous the ‘need’. But a market in carbon: quoi?
Quietly and without fuss, all the rules of classical economics are being torn up – in a way that could be very foolish indeed. As we approach the deal-making at the UN conference on climate change at Copenhagen, it is worth thinking about exactly what we are doing here.