Tuesday, November 17, 2009

Derivatives: "Shell pushes for unfettered carbon trading markets" (RDS.A)

If you can't trust oil companies, hedge funds and Goldman Sachs, who can you trust?
From the Houston Chronicle:

Royal Dutch Shell Plc is calling for the removal of any restrictions on carbon credit trading and asking for derivative contracts to be allowed under cap-and-trade programs.

“You have to allow a secondary market to develop,” David Hone, Shell's climate change adviser, told reporters at an energy conference in Singapore today. “You don't want to have a carbon market that's restricted from doing what other commodity markets are doing.”

Legislators in the U.S. plan to impose restrictions on trading of carbon credits under a proposed cap-and-trade program, on concern that speculators will drive up carbon prices and costs for consumers.

Under such programs, emitters are permitted to release a certain quantity of polluting gases and are allotted permits for that amount, which can be bought and sold as required. The European Trading Scheme, mandatory for heavy industry and power generators, is the world's largest. There are also voluntary cap-and-trade programs such as the one operated by the Chicago Climate Exchange.

The current economics of carbon capture and sequestration projects require carbon dioxide to cost $100 a ton to make a profit, David Lawrence, an executive vice president at Shell, said Nov. 13. Companies need to advance technology to cut projects costs to make them feasible at $40 a ton “and potentially below that,” he said.

“Is carbon capture and sequestration a possibility? Yes, it is. Can it be done? Yes, it can. Can it cost a lot of money? Yes, it does,” Lawrence said on a Webcast presentation. “These are all in the early days and requires a tremendous amount of work to push this forward, to make them happen.”

European Union carbon-dioxide permits for December advanced 0.6 percent to 13.49 euros a metric ton as of 11:08 a.m. on the European Climate Exchange in London.

Shell and BP Plc are among companies supporting cap-and- trade. Almost 200 countries are due to gather in Copenhagen next month to discuss the terms of a climate accord to replace the Kyoto Protocol, which expires in 2012.

President Barack Obama's administration proposed regulatory changes in August, including imposing higher capital and margin requirements on derivatives markets and requiring certain contracts be processed through clearinghouses. The Commodity Futures Trading Commission has moved to limit commodity speculation amid concerns it's distorting prices....MORE

*Bend Over, Here It Comes Again

Remember, just as economists using the tools of science (mathematics) doesn't make economics a science, artificial constructs like cap-and-trade using the tools of markets doesn't make the racket "market based".

Here's Mr. Soros giving Congressional testimony:

"You have my word as a hedge fund manager...."

[George Soros]