Action Alert


Fair trade or free trade? Let your voice be heard on Minnesota’s future!


The Obama Administration is negotiating two new mega trade deals (one with Pacific Rim countries, another with Europe) entirely in secret, with the goal of further expanding the NAFTA-model of free trade. These trade agreements could have major impacts on Minnesota's farmers, workers, small business owners and rural communities. They could limit Minnesota’s ability to support local food and energy systems and grow local businesses. In order to stay up to speed, Minnesota has set up a new Trade Policy Advisory Council (TPAC) to advise the state legislature and Governor.


TPAC wants to hear from Minnesotans: What concerns do you have about free trade? What role could TPAC play in the future? Now is your opportunity to have a say in our future trade policy. Complete the survey and let them know future trade negotiations should be public, not secret. Help ensure the voices of all Minnesotans are heard in the development of trade agreements and that they protect local control and our quality of life. The free trade model has failed for Minnesota and we need a new approach to trade. Help ensure the voices of all Minnesotans are heard before trade agreements are completed, and that they protect local control, our natural resources and our quality of life.


Please take five minutes and complete the survey. To find out more about these trade agreements, go to iatp.org/tradesecrets.

Speculating on Carbon: The Next Toxic Asset

By Dr. Steve Suppan   
Published November 30, 2009

AgricultureMarketsBusiness and industryMarket speculation

“At a time when derivatives trading has fallen in the wake of the financial crisis, volumes for trading greenhouse-gas emissions futures have exploded on the Chicago Climate Futures Exchange, the US’s biggest platform.”
Hal Weitzman, “Greenhouse gases offer growth prospects,” Financial Times, October 21, 2009.

Overview

As Parties to the United Nations Framework Convention on Climate Change (UNFCCC) prepare to meet in Copenhagen, the United States is advocating for a new agreement that will be consistent with U.S. climate change policy. But the terms of U.S. policy are far from agreed. It is not clear, for example, whether the carbon dioxide equivalent Greenhouse Gas (GHG) emissions will be treated as a tradable commodity within poorly regulated commodity futures markets. Here, we analyze the relevant U.S. climate proposals to determine their potential for inducing futures market price volatility. Sustained price volatility would disrupt the carbon price signals, which, in theory, will guide decisions about when and how much to invest in GHG reduction technologies.

We will look at the UNFCCC context of the U.S. legislation. Some of the drivers of commodity futures price volatility of 2006–2009 are summarized, since carbon will be likewise affected by these drivers, particularly to the extent that carbon is bundled into commodity index funds. The effect a proposed carbon derivatives market could have on agriculture prices and vice versa is also examined. The U.S. Congress has studied the European Union’s Emissions Trading Scheme (ETS), so the debate over the efficacy of the ETS for reducing GHG emissions is briefly summarized. Particular features of the draft U.S. legislation that could result in highly volatile carbon prices are also outlined.

IATP questions the efficacy of current U.S. cap-and-trade proposals to reach GHG reduction targets. However, it appears that the current framework for cap and trade will move forward, and it seems very likely to rely on the carbon derivatives markets as a chief means to reduce GHG emissions. Will carbon become the next toxic asset for multibillion dollar financial speculation? And how could we better achieve what Friends of the Earth’s Michelle Chan calls a “smaller, simpler and more stable” carbon market?1




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