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Fill your Lungs it's only Borrowed Grime

By Gregory Palast for The Observer/Guardian UK
Up in the hills of Tennessee, they just love air pollution. Can’t get enough of it. In fact, they’ll spend hard cash for more of it.
In May 1992, the Tennessee Valley Authority paid a Wisconsin power company for the ‘rights’ to belch several tons of sulphur dioxide into the atmosphere, allowing the authority to legally exceed contamination limits set by law. Wisconsin cut its own pollution to offset Tennessee’s.
This was the first trade in emissions credits, an experiment in using market mechanisms to cut nationwide pollution overall.
Why should you care if Billy Hill is paying good money to suck soot? Because trading the rights to pollute is going to be the cornerstone of the global warming treaty that will set the rules for industrial production around the world for the next three decades.
The treaty, known as the Kyoto Protocol, aims to slash ‘greenhouse gases’. As you can imagine, industry’s big guns have lined up against it, and leading the charge in the US is Citizens for a Sound Economy, an ultra-right pressure group chaired by corporate super-lobbyist Boyden Gray.
Squaring off against the pressure group is the influential Environmental Defense Fund of Washington DC. So committed is the fund to the treaty that it set up an affiliate to help implement the protocol’s trading system. It is called the Environmental Resource Trust. It is chaired by Boyden Gray.
Huh? How did Gray, top gun of the anti-treaty forces and industry defender, become the chief of a respected environmental group? One far more cynical than I might suggest that Gray and his polluting clients, having failed to halt the clean-air treaty, have devised a new way to derail the movement: if you can’t beat ’em, buy ’em.
Covered in the sheep’s clothing of a respected green organisation, polluters can influence the treaty implementation to make certain that they can minimise any changes to their dirt-making ways.
That’s where the Tennessee model comes in. By insinuating into the protocol the right to meet pollution targets by buying emissions allotments, US industry can blow up the treaty from within. Corporate lobbyists try to keep their fingerprints off the filth-trading proposals. The Environmental Defense Fund is left to front the scheme.
But the real drive behind limitless use of the contamination credits originated with the corporate lobby Business Roundtable, which left a memo to that effect on a photocopy machine in November at the Buenos Aires round of talks. Activists made it public with glee.
Other than the general creepiness of selling rights to pollute, what is wrong with such trades if they painlessly cut emissions overall? Well, keep your eye on that ‘if’. I haven’t yet found a single trade that kept an ounce of pollution from the atmosphere. The free-market fix for dirty air was rotten from the first deal.
In the 1992 Tennessee case, the Wisconsin company that sold its surplus rights to spew sulphur dioxide could never receive state authority to build another polluting power plant. There was no real reduction of pollution in Wisconsin, but the extra spume of poison into the Tennessee mountains was real and deadly.
Despite this sorry record, American negotiators pushed emissions trading as a take-it-or-leave-it condition of US participation in the treaty. Tony Blair, hearing the words ‘voluntary and incentive-based’, could barely contain his enthusiasm.
Emissions trading, as a so-called ‘market mechanism’ for saving the biosphere, is the pride and joy of the Third Way, the means by which New Democrats and New Labour hope to replace those nasty old rule-by-command laws – ‘thou shalt not pollute’ – with efficient retail transactions, possibly at your local Toxins ‘R’ Us. The US already has a ‘stock exchange’ where 15 million tons of sulphur dioxide trade each year.
Under US treaty proposals, any American or European manufacturer that wants to crank up its discharges will have to buy rights from a company which has cut emissions. But where in the world will they find earth-friendly industries willing to sell their rights to pollute? You’ll never guess: Russia and Ukraine.
In case you were on holiday when Russia became an eco-paradise, I’ll explain. The treaty allocates rights to pollute on the basis of air pollution figures for 1990. Until then, Communist rule forced Russians to work in grimy, choking factories. Now they are free not to work at all.
Russia’s industrial depression has cut its emissions by 30 per cent. So the bright side of the impending starvation on the steppes is that it could generate enough credits to eliminate 90 per cent of US industry’s assigned reduction in pollution.
Is anyone fooled? Did the US tree-hugging Vice-President Al Gore jump up and holler ‘fraud’? Not a chance. To corporate applause, Gore has blessed the bogus trading.
To protect his green credentials, Gore has held plenty of photo-opportunities surrounded by recognised environmentalists – representatives of the Environmental Defense Fund.
It gets worse. The Clinton Administration has just announced a scheme to give ‘early credits’ to US companies which cut emissions before the treaty takes effect. If a chemical company shuts a plant to bust its trade union, for example, it gets credits. A dozen leading environmental groups are up in arms about this windfall – but not the Environmental Defense Fund, which takes pride in crafting the proposal’s details.
How did the fund come up with this bizarre idea? The Observer has copies of internal documents from the Environmental Defense Fund unit chaired by Boyden Gray. These state that ‘most of the major utilities have been regularly meeting with EDF staff to discuss this concept’ – and they would pay fees to the fund for creating the early-credits market. A fund staffer admitted that the plan was drafted with Southern Company and American Electric Power ‘looking over our shoulders’.
The sale of credits has chopped off the legs of anti-pollution laws in the States; now, it will be used to sabotage the global warming treaty. We know the attractions of the trade for government: it is the ugly stepchild of the new mania to replace regulation with schemes that pose as ‘market’ solutions. It provides a public pretence of action while giving winking assurance to industry that the status quo will remain.
But what attracts environmentalists to these schemes? Why do some appear to act like rent-a-greens for Boyden Gray and the corporations they once blasted? It is not venality. Rather, genteel alliance with industry is the ticket that lets them hang out with Gore and the big boys in the deal-making loop. Unfortunately, the collaborators have confused proximity with influence. As one old-style activist put it, gimmickry will never replace guts in the battle against commercial authority.
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Gregory Palast’s other investigative reports can be found at where you can also subscribe to Palast’s column.
Gregory Palast’s column “Inside Corporate America” appears fortnightly in the
Observer’s Business section. Nominated Business Writer of the Year (UK Press
Association – 2000), Investigative Story of the Year (Industrial. Society – 1999), Financial Times David Thomas Prize (1998).

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