George Soros, the billionaire currency trader, has slammed the use of cap and trade carbon emissions trading systems, claiming they are “ineffective” and do nothing to stop developing countries increasing their levels of pollution. Speaking last week at a high-level regional energy conference in Budapest, Hungary, Soros, said: “The cap and trade system of emissions trading is very difficult to control and its effects are diluted. It is pretty much breaking down because there is no penalty for developing countries not to add to their pollution. You count the saving but you don’t count the added pollution going on. As a world, I don’t think we are getting our act together on climate change at the moment.” Soros was particularly scathing about the Clean Development Mechanism developed under the Kyoto Protocol whereby companies in developing countries earn credits for low carbon business projects: “They are not effective: you buy credits in third world countries that don’t have a cap on emissions and you can get carbon credits whether you can sell them or not.” Responding to a question from Responsible Investor, Soros said: “It is precisely because I am a market practitioner that I know the flaws in the system. It would be better if a flat rate carbon taxation systemwas introduced with the revenues invested in a global innovation fund to fight climate change. We may also have to take steps in areas like taxing energy consumption rather than the income of employees or such things.” Soros said politicians had now recognised the reality of global warming, but added: “Even if we stop adding carbon dioxide it is likely the world will become warmer over the next 20 years. The science is pretty well established now, but the process is non-linear and the current results tend to exceed the worst expectations, especially because of increased demand due to rapid economic growth in India and China. Unless we reduce emissions globally over the next 20 years then we will exceed the two degrees accepted tolerance in temperature rise set out by the Intergovernmental Panel on Climate Change.” Soros said business had a key role to play in carbon reduction and would push the technological breakthroughs in these areas. However, he said the question still to be answered was what sort of environmental legislation governments would eventually settle on to reduce emissions. Soros has stakes in cane sugar based ethanol production companies in Brazil as well as investment in the production of an electric car being developed in the US.