Opposition Leader Tony Abbott's clumsy remarks on climate change ('a so-called market, in the non-delivery of an invisible substance to no one') have been roundly criticised and interpreted as a 'dog whistle' to the climate sceptic wing of his party's supporter base.

So what was he really getting at? Fairfax environment editor Ben Cubby thought the 'so-called market' phrase was a nod 'to the sympathies of people suspicious of money markets, it positions the Coalition as the party with the knowledge to discern real markets from fake ones.' There might be something to this, particularly when you consider that there is legitimate criticism out there about the incredible complexity of carbon trading and the potential for manipulation and fraud.

The Australian's foreign editor, Greg Sheridan, who seems to have Tony Abbott's ear, has run this argument, and here's a 2011 piece from finance industry analyst Xavier Rizos, in which he gives an example of how hard it is to calculate carbon offsets:

Kevin Anderson, director of the Tyndall Centre for Climate Change Research eloquently illustrated the issue before the UK Parliamentary Environmental Audit Committee in 2009. He gave the example of:

A wind farm in India that may claim to be generating carbon credits because it is saving, over a century, fossil fuels over and above what would have been saved without the project: [B]ut the wind turbines will give access to electricity that gives access to a television that gives access to adverts that sell small scooters, and then some entrepreneur sets up a small petrol depot for the small scooters, and another entrepreneur buys some wagons instead of using oxen, and the whole thing builds up over the next 20 or 30 years.

Anderson's point was that assessing the effectiveness of an offset in reducing CO2 levels over the following 100 years - as stipulated by the Kyoto regulation - is equivalent to "Marconi and the Wright brothers getting together to discuss whether in 2009, EasyJet and the internet would be facilitating each other through internet booking".

Moreover, if those genuine technical challenges were not enough, offsets are also highly exposed to abuse and fraud. For instance in 2008 the Los Angeles Times reported that offsets would help build 21 new fossil fuel plants in California, usurping funding that could have gone to renewables instead.

But as the FT argued back in 2007, the potential for manipulation in carbon markets just strengthens the case for a carbon tax.