Beyond ‘potemkim’ carbon markets, towards true sustainability metrics

Hazel Henderson, the author of the Green Transition Scorecard, describes how, despite the obvious failure of carbon markets, other developments are going into the right direction of a green transition.

The original article is much article and has many link. The following excerpt is quite dense, but has many references to concrete projects.

Hazel Henderson:

“We agree that this green transition is necessary, viable and inevitable – as those “Potemkin markets” for trading carbon have failed to even slow the total carbon emissions (“Worst-ever Carbon Emissions,” IEA). Private investments now at over $2 trillion are still leading the way and encouraging pension funds, as well as governments and international financial institutions to set up guarantees and green bonds. The leadership of UNEP-FI in helping create the UN Global Compact and the UN Principles of Responsible Investment (UN PRI, with 800 firms and assets under management of over $25 trillion) has been unappreciated and hardly mentioned in mainstream media. UN PRI has now helped launch reforms in business school curricula, similar to the RI Academy in Australia. These curricula reforms will address the blockage of obsolete portfolio management and asset-allocation models (“Changing the Game of Finance,” SRI in the Rockies) by offering re-training courses for portfolio managers in ESG “triple bottom line” accounting and integrated valuation models of EIRIS and the Global Reporting Initiative (GRI). In truth, there are few “black swans” or “perfect storms” since these labels are simply excuses, concealing narrow, inadequate models and the pernicious practice in economics and too many business models of “externalizing” social and environmental costs (World Affairs). Responsible, ethical investors developed the new accounting protocols in the GRI. Accountants and micro-economists developed the new models at the company level, while the LSE’s Paul Woolley Center for the Study of Capital Market Dysfunctionality promotes a set of Principles for Institutional Investors to address the glaring conflicts of interest in the financial system between agents and their principals so familiar in corporate law (Future of Finance review).

Today, at last, governments are facing up to the task of similar reforms to national accounts: GNP/GDP stemming from the Beyond GDP conference in the European Parliament in 2007 ( and the Ethical Markets-Globescan surveys showing large majorities in 12 countries, of the public’s understanding of the need to include indicators of health, education, poverty gaps and the environment in GDP and all national indicators. The OECD’s new Better Life Index moves in the right direction – and its next revision will include indicators of poverty gaps (GINI coefficients) as cross-cutting measures of inequality and gender. Relying on GDP’s averaging of incomes will give way to more granular views of other forms of wealth beyond money: healthy, educated workforces; efficient infrastructure, and productive ecosystems, all set at zero in GDP. Luckily, we can now overcome the persistent objections of macroeconomists ever since 170 nations agreed to reform their GDP in Rio’s Earth Summit in the 1992 Agenda 21, Article 40. With the development of the internet and the web, we no longer need macroeconomic models of national accounts in GDP used since World War II. These obsolete methods of measuring war production were never intended to measure national well-being, as warned by their developer Simon Kuznets. Now the website “dashboards” displaying all indicators of well being, quality of life in many disciplines and metrics beyond money-coefficients are growing at the OECD, the EC with Jochen Jesinghaus’ MDG Dashboard, in Sweden with Hans Rosling’s dynamic displays, Brazil’s many new “observatories,” and in the USA the pioneering Calvert Henderson Quality of Life Indicators since 2000, still regularly updated at

An indispensible roadmap beyond the Kyoto protocols and the “Potemkin markets” inadvertently created is David Victor’s Global Warming Gridlock. While explaining the wrong approaches of the past, Victor also sees that the world “requires a massive re-engineering of energy systems.” He even calls for geo-engineering, which we see as risky and unnecessary. Kyoto’s obsession with carbon and CO2 was required by financial traders to create a single new “asset class.” This was pushed by the market fundamentalists, including economists as well as entrepreneurial economic guilds in the US and Britain, along with big banks and the financing sectors, and elite US environmental groups, led by the Environmental Defense Fund. We now need to go straight to the green transition and continue growing the infrastructures of the global green economy: smart grids; public transport; compact, pedestrian-friendly cities and sustainable forests, land management and organic agriculture. Progress is bringing better batteries, LED lighting and direct conversion of solar energy based on photosynthesis. We can re-frame “low-carbon” industries properly as “low entropy” since sustainability and eventual climate stabilization is about reducing throughput of energy and materials in economies to the minimum – across the board – beyond the dismal Jevon’s Paradox.

Even the UNFCCC and the IPCC have now changed course in the right direction as we, Mercer, WWF-Ecofys, Tomorrow’s Company and others advocate. The UN’s IPCC with the WMO have recommended policy-makers shift toward addressing emissions of soot, VOCs and methane in local hotspots – thus lowering CO2 emissions more swiftly and cheaply, based on the local and regional agreements that are politically practical. Victor’s main strategic advice in Global Warming Gridlock on forming smaller “clubs” of those willing and enthusiastic about addressing climate change is widely visible: in US-China green technology accords, Britain’s legally-binding “Green Deal” and green bank, the World Bank, local trading systems, private green bonds in the Climate Bonds Initiative and daily shifts in institutional portfolios toward growing the green economies. The UNEP’s Green Economy Report, based on its Green Economy Initiative which was launched in Geneva in 2009, has gathered adopters and led to greater interest in Rio+20 to be held in Brazil in 2012. NGOs continue to provide most of the pressure with WWF, IUCN, Global Footprint, IISD and the Green Economy Coalition (of which Ethical Markets is a member) leading the way. The UNEP report on Recycling Rates of Metals mentioned earlier provides another landmark, describing another huge market failure in properly pricing these metals and accounting for the full costs of their extraction and use – still widely “externalized” from company and government balance sheets. Correction of these pricing errors will reduce virgin extraction rates and lead to expansion of today’s recycling, reuse and remanufacturing industries – already employing millions of workers worldwide. IISD has exposed the absurdities of massive subsidies to fossil fuels even as governments try to cap their emissions and is now correctly fostering more sensible procurement of green technologies.

A seminar in the USA’s prestigious Council on Foreign Relations asks “Are Economists Necessary?” My view has always gone beyond economics, since all public and private decisions must be based in multi-disciplinary systems models such as we pioneered at OTA and later at the Calvert Group. Adam Smith was right about “the human propensity to barter,” but more and faster trading is not always better (“Curbing Financial Trading“). We are aware of market failures and false prices, as well as special interests and tax policy manipulation. Economics can be useful at the micro-level, but macro-economics has failed and is in disrepute. Economics’ focus on money transactions – only one form of wealth – misses all the others. Internalizing all those externalities can help get prices corrected as Trucost is proving. But all the other forms of wealth need the multiple metrics and disciplines TEEB and those now used in all the indicators of well-being, social and ecological assets and quality of life.

Beyond helping develop the newer, more practical approaches needed for the eventual controlling of further carbon-emitting lies the ultimate industrial design revolution toward biomimicry: learning the efficiency principles in Nature’s billion year experimentation and innovative use of materials and design (“Leading Edge Technologies Mimicking Nature” from Paradigms in Progress 1991, 1995). Britain’s Tomorrow’s Company has launched its Tomorrow’s Natural Business program to familiarize corporate managers with these deeper principles of long-term success and sustainability. Beyond costly methods promoted by coal companies, we can use Nature’s carbon sequestration through proper land-management such as pioneered by Allan Savory and shift to forest-saving and the working business models of biomimicry in human production as pioneered by Janine Benyus, John Todd, Gunter Pauli, the Bioneers and others showcased at and by the Buckminster Fuller Awards on which I have served as a judge. All these design reforms and new metrics will reform and re-shape financial markets for the future.”

1 Comment Beyond ‘potemkim’ carbon markets, towards true sustainability metrics

  1. AvatarRobert Searle

    Yes, there is some degree of green progress but a MASSIVE amount still needs to be done….There is thus a need for a credible financial facilitation mechanism by which “enough” monitored grants (and loans where necessary) could be responsibly created ex nihilo (like banks) to deal with an expansion of genuine environmentally sustainable, and socially ethical businesses… See my project on Transfinancial Economics, or TFE by clicking my name.

    Hazel Henderson has also expressed great interest in TFE which I believe could well be the key to the future…………….

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.