Heaven knows they need the money. If you thought California's economy was a mess, just wait for next year's New York (state and city) budgets. Ugly.
Our much repeated proposal is Cap-100% auction-100%rebate. No financial intermediaries. Make it unappealing to the crooks, er, traders.
From the Wall Street Journal:
Over the past year, the economic crisis has devastated the financial services industry that fueled New York's boom years. The ripple effect from Wall Street is still being felt, as unemployment has risen to 10.3% in New York City.
In this turmoil, it may seem hard to imagine a financial market poised to deliver significant growth. However, a rising number of investors and financiers see one in the trading and reduction of carbon. According to financial experts, carbon permits could quickly become the world's largest commodities market, growing to as much as $3 trillion by 2020 from just over $100 billion today. With thousands of firms and energy producers buying and selling permits to emit carbon, transaction fees for exchanges and clearing alone could top nearly half a billion dollars.
If Congress establishes proper oversight of a carbon market, New York's financial talent, expertise and institutions are uniquely suited to provide the tools and innovation for a new commodities market of this size. Firms wishing to invest over the long term will need to turn to our financial sector to create the emerging products and provide the capital that would allow them to make green energy investments....
That is such a big if as to be preposterous. One of our main themes over the last two years is that the wealth transfer that is cap-and-trade will be so huge that every knave, fool, charlatan and varlet will be drawn to "innovate".
Talking about C&T in terms of markets is simply the equivalent of the magicians use of misdirection to distract from the sleight-of-hand.
...Uniform regulation will allow the Commodity Futures Trading Commission to apply and enforce the capital reserves, position limits, and transparency in a way that ensures a safe and well functioning marketplace. New York will be positioned to gain market share in this growing marketplace due to its superior and substantial financial talent and expertise.
Second, the wide range of possible carbon reductions—from agricultural offsets, to efficiency technology, to wind power—will require innovative specialized contracts that can meet firms' needs. For example, in order to finance a new clean power facility, a company will need to lock in a fixed cost of carbon over a long period of time. Standardized derivatives would not provide a company the flexibility to hedge these costs over the long term.We must allow the market to provide the ability to customize products....MORE
These artificial constructs are entirely the spawn of politicians.
Just as using the tools of science (mathematics) doesn't make economics a science, using the tools of markets doesn't make cap-and-trade "market-based".